Bucket Shop Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Bucket Shop, written in plain English, along with examples of how it is used.

What is Bucket Shop?

(n) Bucket shop is a type of betting activity where its customers put their bet on a specific chances like rise or fall of market commodity or stock etc and gain or lose based on the occurrence of actual event. It is a sort of gambling activity

History and Meaning of Bucket Shop

The term "bucket shop" was primarily used in the United States during the early 1900s to refer to fraudulent or unlicensed brokerage firms. These firms would allow their customers to place bets on the future prices of securities or commodities, without actually purchasing them. They would simply keep the bets in a "bucket" and payout the winnings to the customers who guessed correctly. As a result, bucket shops were considered a type of illegal gambling, as they offered no real investment products or services.

Examples of Bucket Shop

  1. John invested $10,000 in a bucket shop where he placed a bet on the future price of gold. The bucket shop operator promised him a huge profit, but in reality, the operator simply kept John's money and never actually purchased any gold.

  2. The state securities regulator shut down several bucket shops operating in the area for illegally soliciting investments and engaging in fraudulent activities.

  3. The Securities and Exchange Commission (SEC) warned investors about the risks of investing in bucket shops and other unlicensed brokerage firms.

Legal Terms Similar to Bucket Shop

  1. Ponzi Scheme - a fraudulent investment scheme where returns are paid to earlier investors using the funds contributed by newer investors.

  2. Boiler Room - a type of fraudulent sales operation where high-pressure sales tactics are used to sell fraudulent or overpriced investments.

  3. Churning - a type of securities fraud where a broker repeatedly buys and sells securities in a customer's account in order to generate high commissions for themselves, rather than for the benefit of the customer.