The "wire" is one of the earliest confidence games used in the 20th century, and made way for later, more elaborate cons such as the rag and the pay-off. Fundamentally, it is not that different from the rag other than one key aspect: the "mark" (victim) must fund the entire endeavor by himself. This small aspect actually creates quite a big problem: it makes the entire con much harder to "sell", which is why con men moved to later games such as the rag to pull victims in more successfully, as well as reap bigger profits.
This particular con, unlike the rag, is probably by nature too antiquated to be used successfully today; however, with a bit of tweaking and money, it might be still be useful in more remote areas, though the monetary payoff might not be as high. Another alternative would be to play this sort of game in another country where government intervention and policing are minimal or unobtrusive, and technology not quite as advanced.
Addendum: There is a small possibility that a form of this might survive modern times, provided that you replace the storefront to be website on the internet, but the social engineering aspect of a grift is lost in the shuffle; I could imagine it working on smaller sums of money, but I would think that most people would be too cautious to go very far on the internet. Then again, the Nigerian scams tell me otherwise.
History and Setup
The name of the con is derived from another type of con, the wire tap. During the early 1900s, small time con men (perhaps unemployed telegraph operators) would lug obscure bits of machinery to different towns, claiming that the device could tap into telegraph wires, creating a potential to make huge sums of money in stocks, gambling, etc. (Whether or not some men truly had such a device on their hands is questionable and highly doubtful.) The biggest profit back then that one could use such a machine for was to tap into horse-racing results, and then delay the report of such results long enough to bet on the winning horse. Because this sort of scam is usually a one-time deal, it was considered to be very low-level.
What occurred to grifters, when faced with such a small-time con, was that it could potentially reap higher rewards when applied differently. Why con a man into buying the machine when it could lead to so many problems? After all, the gadget might or might not work, depending on the lucky guesswork of the scammer in question. The grifters realized that the problem of horse-races, of course, is that you had to get the right horse to win. But how do you always get the right horse to win?
By never using real horse-race results, that's how. Occam's Razor at its finest, at least in thought. In execution, though, it was quite elaborate.
At the time that the wire scam started flourishing, there were already storefronts designed specifically to fleece unsuspecting souls out of their money. To set up one specifically for this particular scam, a grifter would need a storefront designed to look specifically like a betting pool (rather like the Off Track Betting storefronts today), with bets thrown right and left by actors (usually new grifters or those laying low from the law for a little while) to convince a mark of its authenticity. There needed only to be two or three people who needed to act directly with the mark.
By using a fake storefront, a grifter could control everything without any particular technical problems: fake telegraphs, fake results, fake bets. The only thing real was the mark's money. And if timed and played perfectly, a mark would not only gladly give up the money, but do so again.
This was a very popular con during the 1920s; it was apparently the basis of the movie The Sting, which is not surprising considering how well a good grift shows in a movie.
There was one cardinal rule followed (almost) religiously by all grifters: never fleece someone within their hometown. If the person was from Chicago, fleecing was done in Arizona. This rule was generally broken in New York, though it was a rule really meant to protect the grifters from the wrath of the men who realized that they were conned. Other than that, the grifters were free to do as they pleased.
Once a mark was located (usually by "ropers" - men who scoured the countryside in search of easy targets), the mark was brought back to the storefront. The roper was usually a man of unusual charm and charisma, adopting different personas to lull the victim into a type of complacency. Let's call the victim Mr. A, and the roper, Mr. B. At this moment in time, Mr. A is completely charmed by Mr. B, who he sees to be an upright, easy-going man.
Mr. A, who has just made friends with B, is then introduced to another man, who we'll call Mr. C. To the victim, Mr. B and Mr. C seem to be old friends, though rather unusual. On the surface, it seems to be a type of business relationship, though the camaraderie is forced, a bit nervous; they're both hiding something and A notices it. Mr. A is the type of businessman who prides himself on noticing small details, a man of sound good judgment (or so he thinks). And he notices that both Mr. B and Mr. C seem to be looking for a third man, a Mr. D, who simply never shows up.
B and C give up on the mysterious D, and decide to include A instead. Mr. A, who is understandably apprehensive (especially since he does not know Mr. C all that well, having just met him), asks for a clarification of the situation.
Now Mr. C, who is reassured by B's promises that A is a honest man, launches into a life story designed to evoke pity and cause Mr. A to empathize with him. "I was," C says, "a honest man. I worked faithfully for a telegraph company for many years. I thought I'd retire with this company, you know? Get my pension. But those bastards fleeced me of everything. Taken to the cleaners. They gave me no raises and no promotions, and they just recently cut my pension." He waxes wroth at the nameless company, and A, falling along readily, empathizes: C, who could have been a manager or an executive by now, was unfairly stripped of all these possibilities. So he understands why C wants to get back at the company and make some money. But how does C plan to do such a thing?
"I," C says carefully, "will not retire from this company poor." With that statement, he quickly outlines his plan: to gain information from horse races through the telegraphs, and then delay passing the information just enough to squeeze in a bet. "It's a sure thing, to be on something you know will win. No risk involved. Easy."
The only problem, C says, is that in order to make any amount of good money quickly, you need a certain cash flow in the first place, a financier (the mysterious D). However, since D was not here, would A like to participate instead?
Now A is understandably apprehensive at this sort of idea. It's his money, after all, seems a mite risky...
No worries, assures C. "I understand completely. Better to test this out first, get a feel for it." C gives him twenty-five dollars, and tells Mr. B to take Mr. A to the nearest horse-betting storefront (an elaborate sham storefront), while C goes back to his place of employment.
A and B make their way to the nearest betting place, designed to inspire greed and larceny in the mark's veins. If they bet twenty-five dollars, the betters in the store will bet one hundred. If it's twenty-five hundred, the betters will bet nine thousand dollars. It just has to be a big enough sum to make the mark feel like a cheapskate, but not big enough to seem daunting. Both A and B lounge in this place, waiting for C to call.
Mr. C calls with a horse name ("Pipsqueak"), A places the bet on the horse, and naturally, the horse "wins". Mr. A makes fifty dollars from this bet. Now excited, the trio tries again, on another race. Mr. C calls and says that it'll be Lucky Charm.
Now, at this point in time, Mr. A is standing on line to make the bet on Lucky Charm. It's a pity that there are several people in front of him, all betting and taking their sweet time; this arouses Mr. A's impatience and frustration. It also inspires a little embarrassment; the men in front of him are betting hundreds, of not thousands of dollars, and here he is, with just fifty bucks on hand. Just as the man in front of him leaves, the betting window closes, and Mr. A loses out on a chance to bet on Lucky Charm.
Guess what horse wins?
Mr. A realizes that he could have won had he been just a little bit faster in betting. He thinks about the long betting line. He thinks about the bet he just missed. Most importantly, he thinks about the money he could have made had he been fast enough.
This ploy is called "shutting out"; it causes the victim to be overly reckless about how much they're willing to bet and how quickly. Do it enough times, and all the victim can think of is how he keeps losing money by not being quick enough. They'll easily bet without thinking.
After Mr. A has won a few times, made a few hundred bucks from betting, he (and Mr. B) gets kicked out of the betting area by the proprietor, who condescendingly tells the pair that the "small pocket change" that they're betting is not appropriate in his betting room. They were better off betting in room next door, where the "working men" were. This is designed to hurt A's pride, and he'll flare up. He's a good honest businessman, and he's in no way poor! "How much does it take to bet in here?" he'll demand.
The proprietor will shrug and smile condescendingly, amused at the "little man's" anger. "Five thousand. The sky's the limit from there." He makes it obvious that he does not believe A or B have that kind of money, and he dismisses them with little care.
Both A and B are incensed at that kind of treatment, but it's the end of the day, so they don't argue. Making their way back to Mr. C, they relate their tale and assure him that the scheme worked perfectly. They'll also tell him about how they got kicked out for betting too little. At this point in time, A's more than willing to be what D was supposed to be: the financier. He suddenly realizes that though he's willing, he might be bumped out by another financier instead if D shows up if he's not quick enough. So he volunteers up front. "I'll put in the money," he says, "since Mr. D's not here. All right?"
They agree to it, but they caution him to not be overly quick about withdrawing money; the bank would get suspicious if he withdrew a huge sum unless he had a valid reason, like, say... "Real estate," suggests Mr. B. "Say you're buying a piece of real estate." They'll bicker over a way to divvy up the profits, and despite the arrangement, Mr. A feels that it is somehow unfair; after all, Mr. B gets a share of the profits, and he didn't do anything! He doesn't call, he doesn't bet, and he doesn't supply any money! But it's not worth quibbling over, really.
Both B and C send him off home to fetch the money. Surprisingly, despite the distance between the betting hall and A's town (usually in different states), a victim will go through a lot, spend a lot, just to bring the money back; the greed is that strong. There have even been stories of men who will liquidate their life savings and spend months braving storms, accidents, skirmishes, and bad weather just to make their way back to grifters! That's how strong the greed holds them.
And so Mr. A comes back with a suitcase full of cash (perhaps thirty grand), expecting to double, or triple, or even quadruple his money in a matter of minutes. They arrange themselves in the same setup as before (Mr. A accompanied by Mr. B, while Mr. C is somewhere off at his company). Waiting for the call, Mr. A can't help but be excited; the money he'll make...!
The call comes; Mr. B answers it. Mr. C tells Mr. B to "place it all on Sweet Pea." Mr. B relates that to Mr. A, who then puts all the money on the horse Sweet Pea coming in first.
Not so surprisingly, Sweet Pea places and therefore comes in second (when a horse "places" it means it comes in second place). Within seconds, Mr. A goes from having thirty grand to nothing.
Mr. A is in shock. When Mr. C comes by to share the winnings, he finds out what happens and loses his temper with Mr. B. "Place!" he rages. "Do you understand what place means?" Mr. B stammers an apology, and says that he thought it meant to place all the money on Sweet Pea coming in first... Mr. C explodes and completely takes it out on Mr. B, which makes Mr. A feel pity for B.
It was an honest mistake, Mr. A thinks. Anyone can get confused with the wording of "place", right...? Thirty grand wasn't that bad. If he raised another twenty grand, he could replace his money. Just had to be more explicit next time, right?
If the greed is strong enough, Mr. A will go back home to get more money to play again. If not, Mr. A will go home a dejected man, and never think about the game again. And in the not all that uncommon case that Mr. A feels that he has somehow been conned and threatens to go to the police? Well, it's not all that difficult to shake him off; Mr. B and Mr. C only need to remind him that what he participated in is indeed illegal and that perhaps the police might be after them...
Either way, Mr. B and Mr. C, later that night, will split up the thirty grand between them and congratulate themselves on a job well done.
Maurer, David W. The Big Con: The Story of the Confidence Man, Anchor Books, 1999 (original printed in 1940)