Legal Definitions - bucket shop

A bucket shop is a type of brokerage firm that engages in illegal activities during the trading process. This can involve stealing money or other assets from traders or investors. One common method is for the firm to sell an asset to the customer for more than it actually costs and keep the difference.

For example, if a stock is trading at $50, the bucket shop might tell a customer that it is trading at $55 and then sell the stock to the customer for $55. The bucket shop would then keep the extra $5 per share for itself.

Historically, bucket shops were gambling operations that allowed people to bet on stocks and other markets. These operations were illegal and often targeted inexperienced, working-class citizens. The dealers would leverage the betting of gamblers, increasing the lure of quick money and downfalls soon thereafter.

While bucket shops helped usher in an age of ordinary citizens being able to invest in markets, they were eventually outlawed in most states. Today, bucket shops are illegal brokerage firms that deceive traders or investors during the brokering process.