The 1930s: The Rise of the SP


As chemists were gradually coerced into withdrawing from the illicit cocaine trade [by the 1929 Consorting Clause], the Drug Bureau and Customs worked to break up the smuggling and criminal distribution networks. By the mid-1930s police efforts began to have an impact on the narcotics traffic. Although the two-man Drug Bureau began its work in 1926 in pursuit of the most obvious street pedlars, within four years the squad had identified the essential components of the narcotics traffic and began to dismantle the trade. European-manufactured cocaine purchased freely in Asian ports was smuggled into Australia by Chinese seamen and delivered to Australian Chinese. Confirmation of Chinese involvement in cocaine smuggling was provided by two large seizures in August and November 1932. Based on these investigations police had concluded that ‘the Chinese in Sydney were the principal distributors of cocaine in bulk’. The Chinese dealt with the major cocaine wholesalers like Kate Leigh and Phil Jeffs who distributed it to addicts through street pedlars. To protect their dealers and themselves from the razor gang and other standover merchants, the major cocaine dealers retained the services of strongmen like George ‘Gunman’ Gaffney and Frank Green. The Drug Bureau pursued street pushers and wholesalers like Kate Leigh, and the Consorting Squad harassed the syndicate strongmen. The result was a comprehensive assault on the cocaine trade.

Official N.S.W. police reports indicate the rapid progress made in cocaine suppression during the years 1933 to 1936. Attributing the progress to the ‘consorting’ provisions of the Vagrancy Act, police reported in 1933 that ‘the drug traffic is being kept in check, and there was a considerable falling off in the illicit traffic in cocaine’. Almost all diversion from pharmacies and dentists had stopped, and Chinese seamen were reportedly the main suppliers.In 1935 police reported that the drug traffic had been reduced to a minimum, and the following year the police claimed a total victory over the illicit cocaine trade. Despite sporadic seizures in later years, the police were essentially correct when they said that Sydney’s criminal cocaine traffic was at an end.

The success of the cocaine suppression campaign showed that the N.S.W. police were still capable of controlling organized crime. Although comprised of only two men, the Drug Bureau arrested hundreds of pedlars, convicted Kate Leigh and cut off illicit cocaine supplies by pressure on bulk distributors. Powerful and prosperous, the leading cocaine dealers used sophisticated techniques to insulate themselves from the traffic, but were still brought down primarily by the work of two detective sergeants — one of the few instances in which a drug distribution network was broken by police work, and a remarkably successful effort by any standard. Refusing at least one known offer of partnership from a cocaine dealer, the Drug Bureau pursued the chain of distribution methodically, seizing progressively larger quantities of cocaine and making arrests that escalated from street pusher to importer. And the supporting players like the standover men and brothel keepers were arbitrarily detained under the Consorting Clause of the Vagrancy Act.

In retrospect, the suppression of the cocaine traffic does not appear to have been a terribly difficult task. The regular and repeated contact between addicts and street pedlars, pedlars and distributors, distributors and importers, made identification relatively simple. Outraged by razor violence and narcotics traffic, the Sydney community — the press, public and all parliamentary parties — decided to eliminate a noxious vice and those responsible for it. Drawing on such Draconian, pre-modern legal practices as ostracism, rustication and arbitrary detention, the courts and police simply cast out the pariahs. In the small town atmosphere of Sydney in the 1930s it was generally understood who the targets were to be, and there were few abuses of these exceptional powers and fewer civil libertarian qualms. It was a remarkable exercise in social control.

The experience revealed a good deal about the character of law enforcement in Sydney of the 1930s. The police had not yet been seriously corrupted and were still capable of enforcing the law when given the necessary resources and public support. For all of their bravura, the criminal gangs of the 1930s crumbled under police pressure. The balance of power between organized crime and the police was still very much on the side of the law. It was also apparent that the police lacked the standing forces for consistent crime control, and required a political and public mandate before they could become effective. In the case of cocaine, a political consensus decided to eliminate it and the police were suitably armed. But in regard to sly grog and SP bookmaking, the working-class and its Labor representatives deemed them acceptable social activities. The police were denied support and these vices survived into the 1950s as the economic base of organized crime.

The loss of the cocaine traffic was a serious blow to the economic base of organized crime in Sydney. It was exceptionally lucrative, but its combination with organized prostitution compounded the profitability of both enterprises. From the perspective of brothel-keepers, an addicted prostitute was an ideal employee; her need for the drug forced her to work long hours and her constant sedation made her a pliable subordinate. More importantly, an entrepreneur like Kate Leigh profited doubly from the income of a working prostitute, taking a considerable portion of the prostitute’s share by supplying her with narcotics. An addicted prostitute could no longer barter her youth for income and capital, but was forced to remain in the business to support an expensive habit until age reduced her currency. She was then forced into retirement without savings.

It was this enormously profitable combination of prostitution and narcotics which financed the rise of organized crime in the 1920s. But syndicates spawned by the cocaine traffic fragmented in the early 1930s as the police suppressed the illicit narcotics trade, destroying the financial basis of gang activity. Individual criminals drifted into sporadic standover work or specialized in single businesses like sly grog or prostitution. Most never again achieved the wealth and influence that they had once enjoyed.


Sly grog and SP bookmaking remained to sustain the city’s professional criminals. The Depression threw hundreds of thousands out of work, reduced the incomes of nearly all Sydney residents and contributed, ironically, to a boom in illegal, off-track book-making. Unable to afford fares and entry fees at the racetracks, devoted working-class betters placed a twopenny or shilling wager with SP bookmakers over the telephone or at local hotels, encouraged perhaps by the hopeless economic conditions to trust a percentage of their financial future to fate. As SP bookmaking boomed during the 1930s, the standover merchants began collecting an informal tax on illegal off-track betting.

SP bookmaking has remained the most consistent source of income for Australian organized crime. While the narcotics traffic has been sporadic and the sly grog trade ended in the 1950s, the SP racket has survived. In the decades following World War II the SP racket came to be regarded by police and the N.S.W. Labor Party as a constant Australian vice which, like prostitution, was utterly beyond the influence of law enforcement. Illegal off-course betting in the specific form known as SP is, however, a relatively modern industry which has adapted constantly during the past half century in response to new technology, consumer demand and government policy. As the enterprise grew and prospered in the 1930s, SP acquired some powerful and ironic allies, including the Labor Party, elements within the Catholic Church and important segments of the media. Controversies over the open operation of SP betting were among the major political battles in New South Wales’ politics during the 1930s, and the industry’s survival was due in large part to the popular support it won from working-class districts.

While the SP enterprise is relatively new, legal and illegal horse race betting is almost as old as the Colonies. In 1810 formal three-day race meetings were already being held and in 1825 the Sydney Turf Club was established as the first racing administration in Australia. By the 1880s almost every country town had its own racecourse, and the weekly meetings at Sydney and Melbourne regularly drew an attendance of 30,000 to 40,000 people. Illegal betting shops opened in the major metropolitan centres to service the large clientele unable to place their bets at the track. The most famous of Australia’s illegal bookmakers in the late nineteenth century was Melbourne’s John Wren. Operating with apparent immunity to police investigation between 1893 and 1906, Wren’s Collingwood Tote shop earned him a profit of £750 per week and had an enormous clientele. Wren’s apparent immunity to arrest became a major political scandal and led to the passage of severe anti-gambling legislation in 1906. Although the law forced closure of Wren’s Collingwood Tote, by then he owned racehorses and courses, and went on to enjoy a career of some decades’ duration as Victoria’s political godfather.

By the century’s turn parliaments and their constituencies all over Australia were clearly divided on the most effective means of dealing with illegal betting. While Protestant clergy and the less tolerant of society’s wealthier classes advocated a total eradication of all off-course betting, working-class leaders and more liberal representatives settled on the ‘totalisator machine’ as the way of eradicating the illegal bookmaker. The totalisator was a mechanical device which quickly summed up all the bets placed at the racecourse and enabled its operator to calculate the odds on each horse in an impartial and honest manner. Under the totalisator, the better was paid in a pari-mutual manner, and no longer competed against the odds of the bookmaker or suffered the entanglements of the credit that many offered.

While South Australia passed an act legalizing a totalisator at licenced racecourses in 1879, New South Wales and Victoria continued to debate the issue for the next thirty years. In 1912 an exhaustive N.S.W. Royal Commission on Regulating the Totalisator toured most of the Australasian colonies to investigate betting systems and discovered that punting was a vast enterprise. New South Wales had 1,310 licensed bookmakers at eight tracks, of whom 436 operated at Randwick; the annual attendance at the six metropolitan area tracks was 926,000, with an average at Randwick of 35,000 per meeting; and one sports writer estimated Sydney’s total annual racing turnover at £6.3 million. One of Sydney’s largest bookmakers, Solomon Green, reported his annual turnover was £300,000, yearly profits £60,000, and his average investment per meeting £12,000.

Despite evidence of successful totalisator operations in New Zealand, Tasmania and South Australia, the majority report of the Commission recommended against its introduction in New South Wales on the grounds that betting in Sydney had ‘reached abnormal proportions’ and would have an ‘unsettling effect on the community if it were to be increased’. But the taxation potential proved too tempting, and in 1916 the N.S.W. Parliament passed the Totalisator Act which legalized the machine and provided penalties for off-course betting.

Paralleling these investigations of the totalisator in New South Wales were parliamentary inquiries into the control of illegal betting in the state. There was a clear ideological division over the issue. In the debates over the 1906 Gaming and Betting Act and the 1908 Police Offences (Amendment) Act, proposed by a conservative government, Labor defended off-course betting as a harmless working man’s recreation. The passage of the 1906 Gaming Act, forced closure of most of Sydney’s ‘tote shops’. When the conservatives then proposed to wipe out other forms of gaming with the 1908 Police Offences Act, State Labor members protested. Arguing that gambling was a fundamental human instinct, Mr Burgess said: ‘There is a strong propensity in human nature to gamble in some form or another. I have a right to risk a shilling or two if I have it to spare, just as much as a man who goes down to the Stock Exchange and gambles in mining scrip. That is a form of gambling that is infinitely worse than gambling on a racecourse’.

Despite the passage of these two acts, illegal gambling of all kinds persisted. By the end of World War I, the on-course bookmaker, race course totalisator, and off-course bookmaker were well established. During the early 1920s, however, the SP business was still far from the considerable turnover it achieved in the 1930s. The unprecedented prosperity of the 1920s supported high attendance at race meetings, and the relatively rudimentary state of Sydney’s electrical communications restricted the range of the city’s SP networks.

SP IN THE 1930s

The SP business boomed during the 1930s. The rapid dissemination of radio sets and telephone connections created a communications infrastructure, and the Depression deprived many would-be betters of the means for a trip to the track. No longer restricted to the clientele who entered the betting shop, the SP bookmaker could contact everyone with access to a telephone, while the off-course better could follow the race live through radio broadcasts. The illegal off-course bookmaker required telephone services for information about the on-course prices, to ‘lay off’ or post covering bets with other bookmakers if over-committed. Between 1914 and 1940 the number of telephone connections in New South Wales increased by 400 per cent, with the largest increase between 1920 and 1927 when the number doubled. The increase in radio receivers was even more dramatic. In the two decades following the start of public broadcasting in the early 1920s, the number of radios increased from 25,331 in 1923 to 494,884 in 1941.

When the Depression sapped the average punter’s ability to pay a one shilling tram fare to the track, the SP operators could be found flourishing at the bar of almost every neighbourhood pub, positioned near the pay telephone. The precipitous decline of racecourse attendance and betting threatened the finances of the jockey clubs and the N.S.W. government. Between 1929 and 1934, for example, the average attendance at Kensington race meetings plummeted from 7,189 to 4,064, while totalisator tax collections fell from £l4,323 to £4,230.

The Australian Jockey Club (AJC) and proprietary race courses applied pressure on the police and political parties to suppress off-track betting. Following the formation of a special SP squad in 1930, the number of arrests for illegal gaming increased from 2,069 in 1929 to 3,808 in 1931 — making gambling offences the largest single category of arrests for the first time in state history. Between 1930 and 1936 the police made 20,000 arrests on SP offences, but convictions did little to deter off-course betting. Finding convictions difficult in a city where, as the N.S.W. police commissioner put it, ’75 per cent of the populace sees nothing wrong in starting price betting’, police resorted to beatings, false ‘verbal’ confessions and a network of informers paid on a bounty system. To blunt the police offensive some SP bookmakers operating in hotels began making regular payments to police. In October 1932 Truth reported that SP men were ‘regularly bewailing that they have to pay tribute to police officers’. Not satisfied with the police effort, the AJC Chairman Sir Colin Stephen met with the Chief Secretary of New South Wales in mid-1935 to demand legislation which would reduce SP betting by banning radio broadcasts of race results, limit newspaper publication of race results, and provide for harsher penalties.

Following a state Parliament debate on 3 March 1936, a Royal Commission was appointed to investigate charges that police ‘have deliberately “framed” men for starting price betting offences’, and ‘improperly failed to arrest and charge the principals and important persons while arresting and charging minor persons’. The commissioner, Judge H. Francis Markell, confirmed the substance of these allegations and recommended: ‘If it were possible to prevent the dissemination of racing information per medium of telephone and/or broadcasting in public houses, I think this would go a very long way towards putting an end to the present unsatisfactory state of things’.

The conservative Stephens Government launched a major betting suppression campaign in May 1938. After an AJC deputation called on the government to express its concern, the club secretary told the press: Unless something is done the committee realizes that there will be only one end to racing in N.S.W. It must go down and eventually peter out altogether’.

The government launched its anti-SP campaign on 13 May 1938 when Judge Markell gave the head of the Metropolitan Anti-Vice Squad, Inspector W.J. Keefe, a court order declaring three city hotels ‘common gaming houses’. Chastened by a police threat to declare another 200 hotels ‘common gaming houses’, Sydney hotel keepers barred SP bookmaking in their premises and for the first Saturday in over a decade the radios over the hotel bars fell silent. But the SP bookmakers successfully adapted to these restraints: illegal telephone betting ‘increased 100 per cent setting a new worry for police’; special SP shops opened nearby the hotels; and ‘runners’ began circulating to take bets.

While the racecourse proprietors were happy with the increased attendance, there were some indications that police pressure made the SP men more vulnerable to standover without really curbing the scope of their operations. The Labor Daily reported that stand-over men ‘made a reappearance in an attempt to muscle in on the new conditions’ by providing new venues for SP shops. The Daily Telegraph expressed strong fears about the probable outcome of the police effort: ‘The harder the police drive, the deeper into the underworld the bookmakers will go. The Government will have accomplished precisely the opposite of what it set out to accomplish. SP will be so closely wedded to crime, that it will be almost impossible to clean up the mess’.

Simultaneously, the government made known its plans for the introduction of special anti-betting legislation, and the parliamentary debates began. Announcing the state Labor Party’s position on the issue, R. J. Heffron, MLA advocated the establishment of government operated off-course betting shops: ‘Their advent will see the end of child runners, welshing bookmakers, “standover” men, and other evils of the present vicious system. Realities must be faced. The gambling spirit of the Australian cannot be suppressed by legislation. Whether it is moral or immoral, the Australian will bet’.

The government’s original anti-SP bill introduced in July 1938 was harsh. Attacking every component of SP operation, the bill proposed to ban broadcast of all but barest news of race results; made SP bookmaking a prison offence, and ruled telephone or other transmission of racing news from the course illegal. The bill’s passage was a stormy one. Truth described it as ‘full of anomalies, injustices and impossible clauses’ and dismissed it as ‘a deplorable, meddlesome, bungling attempt by the government to satisfy certain interests’. Parliament debated the bill in a white heat and the press published large excerpts daily. Truth ran lengthy attacks on the bill with banner headlines claiming: ‘SP Bill: Danger! Vicious Clauses Strike at Roots of Justice. AJC Made a Dictator’.

Despite a last-hour effort by opposition leader Jack Lang to have the penalties reduced, the new SP law was proclaimed in early October 1938. Police operations initially caused some temporary disruption of SP networks, but within a matter of weeks illegal operators had adjusted to compensate for the new situation. The day after the law went into effect in October, ‘tic-tac’ signallers appeared at Randwick communicating odds to a telescope observer outside the course. That same week reporters from The Sun learned that the ‘SP bookmakers’ secret information service, after an early hitch, functioned as usual in Sydney’. The secret SP exchange, which has operated in Sydney for the last forty years, replaced two registered companies that had supplied odds to illegal bookmakers for decades: Telesports Pty Ltd, which had 100 telephones and paid PMG bills of £30,000 in 1937, and Eatons Pty Ltd with sixty-five telephones and £20,000 in PMG charges. The new secret SP exchange reached bookmakers across New South Wales with the full knowledge of the PMG and charged only £1 per race meeting for its services.

There were numerous indications of the continuing vitality of the SP enterprise. Unable to work openly in Sydney’s hotels, many SP men retired to their telephones. Some observers reported that about 25 per cent of the betting was now being done over the telephone through pre-paid accounts or young runners working neighbourhoods on the ‘memory system’ to obviate the need for incriminating betting slips.

Several of the largest bookmakers shifted to Canberra where they were exempt from State law but could still maintain their Sydney networks. One Saturday afternoon on the eve of war with Japan, Prime Minister Curtin tried to place an urgent call to a state premier, but encountered inordinate delays and learned that there were sixty SP betting calls booked ahead of him.

Barred from monitoring telephones by PMG regulations, police only succeeded in driving the illegal bookmakers out of New South Wales State territory (the hotels) into federal jurisdiction (the telephone system and the Australian Capital Territory) where they operated with near impunity. Illegal SP men began to file regular tax returns declaring their illicit income in full confidence that the information would be kept from state authorities. After three months, the N.S.W. government virtually admitted its failure when the Chief Secretary said the law was only ‘reasonably satisfactory’, claiming that ‘we have never aimed at 100 per cent suppression’. By 1940 the SP bookmaker had returned to his place at the hotel and was operating as he had before the passage of the Act.

The resilience and popularity of SP bookmaking made it the major ‘illegal’ activity of the 1930s. Denied access to police protection, SP operators were vulnerable to extortion demands from the standover men. As the illicit cocaine trade was reduced, standover men shifted to SP operators as an alternative source of income. Strongmen like Frank Green and Guido Calletti who made their reputations during the razor wars moved into SP standover, and younger criminals were also involved. The SP men were a separate fraternity which became involuntarily involved with the standover men only because their illegal status made it impossible to seek protection from the police. As standover exactions from the SP men increased, smaller operators armed themselves and the larger ones hired their own gunmen. Occasional killings plagued the SP business until the start of World War II.

from Drug Traffic b y Alfred McCoy