A protection racket is a scheme where a potentially hazardous group guarantees protection from violence, looting, raiding, piracy, and other such threats posed by them outside the sanction of the law, to polities, businesses, individuals, or other entities and groups that pay to them in cash or kind. In other words, it is a racket that sells security, traditionally physical security. Through the credible threat of violence, the racketeers deter people from swindling, robbing, injuring, sabotaging or otherwise harming their clients. Protection rackets tend to appear in markets in which the police and judiciary cannot be counted on to provide legal protection, because of incompetence (as in weak or failed states) or illegality (black markets). Protection rackets are indistinguishable in practice from extortion rackets and distinguishable from private security by some degree of implied threat that the racketeers themselves may attack the business if it fails to pay for their protection. A distinction is possible between a "pure" extortion racket in which the racketeers might agree only not to attack a business and a broader protection racket offering some real private security in addition to such extortion. The criminals might agree to defend a business from any attack by either themselves or third parties (other criminal gangs). However, in reality, that distinction is doubtful, because extortion racketeers may have to defend their clients against rival gangs to maintain their profits. By corollary, criminal gangs may have to maintain control of territories (turfs), as local businesses may collapse if forced to pay for protection from too many rackets, which then hurts all parties involved. Certain scholars, such as Diego Gambetta, classify criminal organizations engaged in protection racketeering as "mafia", as the racket is popular with both the Sicilian Mafia and Italian-American Mafia.
Explanation:
A protection racket is an operation where criminals provide protection to persons and properties, settle disputes and enforce contracts in markets where the police and judicial system cannot be relied upon. Protection racketeers or mafia groups operate mostly in the black market, providing buyers and sellers the security they need for smooth transactions; but empirical data collected by Gambetta and Varese suggests that mafia groups are able to offer private protection to corporations and individuals in legal markets when the state fails to offer sufficient and efficient protection to the people in need. Two elements distinguish racketeers from legal security firms. The first element is their willingness to deploy violent forms of retribution (going as far as murder) that fall outside the limits the law normally extends to civilian security firms. The other element is that racketeers are willing to involve themselves in illegal markets
