We study the displacement of immiscible fluids in deformable, noncohesive granular media. Experimentally, we inject air into a thin bed of water-saturated glass beads and observe the invasion morphology. The control parameters are the injection rate, the bead size, and the confining stress. We identify three invasion regimes: capillary fingering, viscous fingering, and "capillary fracturing," where capillary forces overcome frictional resistance and induce the opening of conduits. We derive two dimensionless numbers that govern the transition among the different regimes: a modified capillary number and a fracturing number. The experiments and analysis predict the emergence of fracturing in fine-grained media under low confining stress, a phenomenon that likely plays a fundamental role in many natural processes such as primary oil migration, methane venting from lake sediments, and the formation of desiccation cracks.