The father of three, who suffered from a lung condition which restricted his breathing, lived just a few streets away from the bookmakers and had a history of violent crime and armed robberies.
In recent years he had struggled with alcohol and drug problems and had a criminal record stretching back to 1976, including two recent prison stretches.
Devon and Cornwall police have referred the incident to the Independent Police Complaints Commission (IPCC), who will conduct their own investigation.
A police spokesman said officers had carried out CPR until paramedics arrived and took over trying to resuscitate him for a further 20 minutes, until he was declared dead.
Ch Supt Andy Bickley said: "I can share with you that the firearm has been initially examined by a police firearms officer and it appears to be an imitation pistol, though this still needs to be verified. I would like to add however that there would have been no way of knowing this at the time of the incident.
"The actions taken by members of the public in the shop were brave and showed a disregard for their own safety."
Mr Levers's nephew Peter, 28, confirmed his uncle's death, saying he had just been reunited with his family and had been trying to move on from his criminal past.
He said: "He was a generous guy who would give you his last 50p if he had it. He had recently been reunited with his family, he was back in touch with his kids, he had a great missus.
"I can't understand why he would do this now when he had everything to live for."
Customers last night spoke of their shock at last Friday evening's turn of events. David Walker, 55, who had gone into the bookmakers to bet on football matches, found two men subduing Mr Levers and assumed it was a fight.
Mr Walker said: "I have never seen anything like it. I don't think you can blame the customers for what happened. They were just holding him down and making sure he could not get up."
Ivor Green, 67, from West Park, said he was not surprised at all that the customers had leapt to the defence of the staff.
"They would do that in a shop like this, it is our betting shop," he said. "The staff become your friends, it's a little family, and it's no different to a member of your family being threatened. The guys in there would be protective of them.
Scenes of Crime officers remained at the scene into the night as a full investigation into the incident was launched.
Forensics experts wearing protective clothing have been working inside the building, which remained taped off into the early hours of Saturday morning. A HM Coroner van was seen leaving the scene shortly before 11pm on Friday night.
Chief Inspector Ian Drummond-Smith said: "This is a very serious incident. We cannot speculate on what has actually taken place here.
"A full investigation has now begun and while the IPCC carry out their investigation it is not appropriate to comment further."
The two storey Ladbrokes remained closed on Saturday as uniformed police stood guard. A spokesperson for the betting chain said: "We're assisting police with their investigation and it would be inappropriate to speculate any further at this time."
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