"member of a criminal gang practicing extortion, 'protection,' intimidation, etc.," 1927, a word from Prohibition, from racket (n.1) in the "dishonest activity" sense + -eer. Earlier (1926) in reference to organizers of fraudulent bankruptcies. By 1928 as a verb. Related: Racketeering, verbal noun (1927).
[A] racketeer is nothing more nor less than a gangster who has organized thuggery along business lines. ["What is a Racketeer?" Brooklyn Daily Eagle, Oct. 7, 1928]