A protection racket is an extortion scheme whereby a criminal group or individual coerces a victim (usually a business) to pay money, supposedly for protection services against violence or property damage. Racketeers coerce reticent potential victims into buying "protection" by demonstrating what will happen if they don't—they damage the victims' property. In most cases, the racketeers do not actually protect their client from anything but the racketeers themselves, and their "protection" is merely extortion. However, if their victim is seriously threatened by a third party, sometimes gangsters will protect their source of revenue.
Legitimate businesses are not the only victims of protection racketeers. Other criminals are also targeted, since they cannot ask police to stop the extortion. However, for that same reason, criminals sometimes actively seek to buy this "protection".
Territorial monopolies 
A protection racketeer cannot tolerate competition within his sphere of influence from another racketeer. If a dispute erupted between two clients (e.g. businessmen competing for a construction contract) who are protected by rival racketeers, the two racketeers would have to fight each other to win the dispute for their respective clients. The outcomes of such fights can be unpredictable, and neither racketeer would be able to guarantee a victory for his client. This would make their protection unreliable and of little value--their clients would likely dismiss them and settle the dispute by other means. Therefore, racketeers negotiate territories in which they can monopolize the use of violence in settling disputes. These territories may be geographical, or they may be a certain type of business or form of transaction.
Providing genuine protection 
Sometimes racketeers will warn other criminals that the client is under their protection and that they will punish anyone who harms the client. Services that the racketeers may offer may include the recovery of stolen property or punishing vandals. The racketeers may even advance the interests of the client, such as muscling out unprotected competitors.
Protection from theft and vandalism is one service the racketeer may offer. For instance, in Sicily, mafiosi know all the thieves and fences in their territory, and can track down stolen goods and punish thieves who dare to attack their clients.
Protection racketeers establish what they hope will be indefinitely long bonds with their clients. This allows the racketeers to publicly declare a client to be under their protection. Thus, thieves and other predators will have little confusion as to who is and isn't protected.
Protection racketeers are not necessarily criminals. In "A Short History of Progress," Ronald Wright notes on p.49, "The warrior caste, supposedly society's protectors, often become protection racketeers. In times of war or crisis, power is easily stolen from the many by the few on a promise of security. The more elusive or imaginary the foe, the better for manufacturing consent."
Real-world examples 
- During the late medieval and early modern era in the Scottish Marches, local farmers would often need to make payments to the Border Reivers as a form of protection money to ensure they are not attacked. These agreements were called "Black mal", where "mal" was an Old Norse word meaning agreement. The word blackmail entered the English language in 1530 as a result, but the word's meaning has changed since.
- In Melbourne, Australia, Alphonse Gangitano ran a protection racket along the famous Lygon Street during the 1990s.
- In Sicily, Italy, it is estimated that around 80% of businesses of the city of Palermo pay pizzo, or protection money, to the Mafia.
- In Ciudad Juárez, Mexico, when the Mexican Drug War escalated in 2008, criminal groups saw their financial backbone threatened and began asking for protection money from businesses ranging from convenience stores to clubs and restaurants with the threat of burning down the business, kidnapping the owners or killing everyone inside with assault rifles.
- In post-Soviet Russia, law enforcement was too underfunded and poorly trained to protect businesses and enforce contracts. Most businesses had to join a protection racket (known as a krysha, the Russian word for "roof") run by local gangsters.
- In the United Kingdom in the 1950s and 60s the Kray twins ran protection rackets in the East End of London.
- On March 23rd 2013 the ICANN launched the Trademark Clearinghouse, a brand protection scheme that charges companies to give them a chance to claim their trademark against gTLD registration.
Government protection rackets 
Government officials may demand bribes to look the other way or extort something of value from citizens or corporations in the form of a kickback. It need not always be money. A lucrative job after leaving office may have been in exchange for protection offered when in office. Payment may also show up indirectly in the form of a campaign contribution. Stopping governments agencies as a whole, and buying protection in the government is called regulatory capture.
See also 
- Bribe Payers Index
- Bid rigging
- Conflict of interest
- Foreign Corrupt Practices Act
- Influence peddling
- Jury tampering
- Match fixing
- Money trail - Money loop
- Organized crime
- Pay to Play
- Pizzo (extortion)
- Political corruption
- Principal–agent problem
- Racket (crime)
- Revolutionary tax
- Taxation as theft
- Transparency International
- Gambetta, The Sicilian Mafia, pp. 68-71
- Diego Gambetta. The Sicilian Mafia: The Business of Private Protection
- Barbara Mikkelson (April 16, 2012). "Etymology of blackmail". Snopes. Retrieved April 23, 2012.
- BBC News - Couple plans 'mafia-free' wedding 1 April 2009
- El Diario de Juarez - Suben 57% denuncias por extorsiones 10 August 2009
- The Washington Post Banditry Threatens the New Russia 2 May 1997
- Misha Glenny (2008). McMafia. Vintage. ISBN 970099481256
- Andrew Cockburn (October 2000). "GODFATHER OF THE KREMLIN: Boris Berezovsky and the Looting of Russia. - Review - book review". Washington Monthly.
- Metropolitan Police Service - The Kray twins - jailed in 1969