What is Bucket Shop?

Legal Definition
As defined by the U.S. Supreme Court, a bucket shop is "[a]n 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." People often mistakenly interchange the words bucket shop and boiler room, but there is actually a significant difference. A boiler room has been defined as a place where high-pressure salespeople use banks of telephones to call lists of potential investors (known as "sucker lists") in order to peddle speculative, even fraudulent, securities. However, with a bucket shop, it could be better thought of as a place where people go to make "side bets" – similar to a bookie.

"Bucket shop" is a defined term under the criminal law of many states in the United States that make it a crime to operate 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. The transaction goes "in the bucket" and is never executed. Because no trading of actual securities occurs, the customer is essentially betting against the bucket shop operator in a game based on abstract security prices. While trading in a legitimate exchange also provides a similar game or wagering aspect, the one distinctive characteristic of a bucket shop is the mimicry of trading securities when no actual securities are traded. The bucket shop's exchange is a fiction, which the parties agree to imagine as following the events occurring in a real exchange. Alternatively, the bucket shop operator "literally 'plays the bank,' as in a gambling house, against the customer." Operating a bucket shop in the United States would also likely involve violations of several provisions of federal securities or commodity futures laws.

A person who engages in the practice is referred to as a bucketeer and the practice is sometimes referred to as bucketeering.
-- Wikipedia
Legal Definition
An office or place (other than a regularly Incorporated or licensed-exchange) where information is posted as to the fluctuating prices of stocks, grain, cotton, or other commodities, and where persons lay wagers on the rise and fall of such prices under the pretense of buying and selling such commodities. Bryant v. W. U.
-- Black's Law Dictionary