Bucket shop (stock market)

A bucket shop is a business that allows gambling based on the prices of stocks or commodities. A 1906 U.S. Supreme Court ruling defined a bucket shop as "an establishment, nominally for the transaction of a stock exchange business, or business of similar character, but really for the registration of bets, or wagers, usually for small amounts, on the rise or fall of the prices of stocks, grain, oil, etc., there being no transfer or delivery of the stock or commodities nominally dealt in". A person who engages in the practice is referred to as a bucketeer and the practice is sometimes referred to as bucketeering. Bucket shops were found in many large American cities from the mid-1800s but the practice was eventually ruled illegal and largely disappeared by the 1920s. According to The New York Times in 1958, a bucket shop is "an office with facilities for making bets in the form of orders or options based on current exchange prices of securities or commodities, but without any actual buying or selling of the property". Bucket shops are sometimes mentioned together with boiler rooms as examples of securities fraud, but they are distinct types. While a boiler room operator seeks to broker actual security trades, the bucket shop's emphasis is on creating the appearance of brokerage activity where none exists. The term originated from England in the 1820s, when street children drained the beer and liquor kegs that were discarded from public houses. The children sold the alcohol to unlicensed bars, where it was mixed together and sold to unwary patrons. These bars became known as "bucket shops." The idea was transferred to illegal brokers who sought to profit from trading activity that was too small or disreputable for legitimate brokers. Bucket shop is a defined term in the many U.S. states that criminalize the operation of a bucket shop. Typically the criminal law definition refers to an operation in which the customer is sold what is supposed to be a derivative interest in a security or commodity future, but there is no transaction made on any exchange.