Chicago Board of Trade

1870s-1920s

“I want to go short 1,000 bushels of December wheat, 1 cent on the bushel.”

This $10 bet was typical back in the heyday of bucket shops in the United States, between 1870 and 1920. People wagered on the future prices of stocks, securities and commodities — grains, cotton, oil, etc. — without actually purchasing the goods.

“The [price] quotations are used as basis of this species of betting as a gambler uses dice to decide the bet [in games like craps],” wrote John Hill in Gold Bricks of Speculation.

How It Worked

In the bucket shop, prices for various commodities were listed and updated on a blackboard as they changed according to the Chicago Board of Trade or whatever exchange was used. The shops often obtained the price quotes via telegraph.

The customer bet the shop that on a certain day or in a given month in the future a commodity would be worth a specific amount. If, at that time, it was, the wagerer won minus the shop’s commission. If it wasn’t, the shop profited. Because of the commission, which the customer paid whether they won or lost, however, the disparity between the amounts the customer and the shop made on a bet was significant, clearly favoring the house.

Say in the example above, the price of wheat was $1 a bushel, and the customer bet it would drop 3/4 of a cent. If it did, he made $5 — 3/4 of a cent minus 1/4 of a cent commission (equaling 1/2 cent), times 1,000 bushels.

But if it went up that much, the bettor lost and the house made $10 — 3/4 of a cent plus 1/4 of a cent for commission (equaling 1 cent), times 1,000 bushels.

“These ‘bucket shops’ flourish for the most part upon the patronage of men and women of small means who imbued with the get rich quick idea, venture or risk that which they can ill afford to and which, once being deprived of, entails hardship and privation upon themselves and their families,” noted the San Francisco Call (Jan. 4, 1911).

Bucket shoppers, or owners of these gambling businesses, often cheated by fabricating the exchange’s price quotes to their advantage to garner profits because patrons couldn’t or wouldn’t try to verify them. Some capitalized on their clients’ naiveté, encouraging them to repeatedly add money to their original stake. Others welched on paying out winnings.

One such San Francisco, California bucket shopper who found himself frequently in the news was Henry A. Moss. 

Eradication Efforts

In the late 1800s/early 1900s, numerous city and state governments banned bucket shops, including those of Chicago, Los Angeles, Missouri, New York and North Carolina. San Francisco outlawed them in 1911. In 1909, the U.S. Congress passed amendments — an Act to Prohibit Bucketing and Bucket Shopping and to Abolish Bucket Shops — to the 1901 Act to Establish a Code of Law for the District of Washington, D.C.

The federal statute “was enacted as a part of President William Taft’s war on the meanest of all the sure thing gambling systems,” reported the San Francisco Call (March 18, 1911).

Not only were bucket shops considered to be a gambling evil, but they also were blamed for contributing to the 1870s agricultural depression and the 1901 and 1907 U.S. stock market crashes because they created “a powerful concentrated interest for the depression of values,” (San Francisco Call, Feb. 4, 1892).

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Photo from Acme Newspapers

1911-1912

A San Francisco, California ordinance outlawed bucket shopping in 1911 — no  longer was running or visiting such an enterprise legal — and one operator didn’t like it.

Henry A. Moss, a bucket shop owner and Nevada citizen, vowed to fight the new law, as it prohibited him from running his four San Francisco branches, which did substantial business. Moss claimed that he’d invested $50,000 in his business locally, that he spent $4,400 a month in telephone and telegraph charges, that he had more than 1,000 customers and that he took in about $15,000 a year in profits (about $365,000 today).

His enterprise, Moss & Co., also had shops in these California locales: Sacramento, Oakland, Fresno, Long Beach, Redlands and San Diego. Locations outside of the state were in Reno, Nevada; Ogden, Utah; and Portland, Oregon.

His Tactics Begin

Moss immediately applied for a temporary restraining order (TRO) and a permanent injunction to prevent the police from hindering his operations, such as arresting him or any of his workers or customers. He claimed the city ordinance was “arbitrary, unreasonable, unjust, oppressive and discriminatory, and in violation both of the constitution of the state of California and the constitution of the United States.”

In response, a judge, in June, denounced bucket shopping as “nothing but gambling,” deemed the ordinance valid and denied Moss’ request (San Francisco Call, June 1, 1911). The proprietor then asked for several days to remove the telegraph network between his offices and close his business.

Instead of shutting down, Moss appealed the ruling and took the case to the federal court, asking it for a similar injunction, which a judge there denied.

City Fights Back

Despite the ban, Moss kept his San Francisco bucket shops open. In October, members of the San Francisco Police Department raided his offices, confiscated various paraphernalia and arrested six employees, 26 visitors and one of Moss’s attorneys.

The following month, those workers and Moss were found guilty and fined $100 or 50 days in jail (the visitors weren’t charged). He filed an appeal and secured a stay of judgment.

Soon after the U.S. District Court of Appeals declared constitutional the law that the federal Congress had enacted, thereby eliminating any basis for Moss’s appeals.

3 More Legal Rounds

1) Subsequently, Moss pleaded his case before the U.S. Circuit Court of Appeals, “reciting imaginary grievances and dismally pleading that his business has been attacked by competitors in the shape of the New York Stock Exchange and the Chicago Board of Trade.”

The justices refused to reverse the lower court’s ruling, thus, denying Moss’ initial request for a TRO and injunction.

2) In December, Moss sued a dozen U.S. Circuit Court officers, charging they all conspired, with the management of the San Francisco Call newspaper (which believed bucket shopping to be nefarious and vowed to help eradicate it), to put him out of business. Further, he asked they be restrained from interfering with his operations.

Again, though, he lost his case. That didn’t stop him.

3) Next, he sued three Call newspaper executives — John D. Spreckels, owner; Charles W. Hornick, general manager; and Ernest P. Simpson, managing editor. He claimed they’d libeled him in the article, “Bucketshop Moss Cries Conspiracy,” which “was intended to impeach his honesty, integrity, virtue and reputation” (San Francisco Call, Dec. 29, 1911).

He also cited an op-ed piece, “Bucketshop Rascal and Newspaper Rascal Join Hands Against a Common Foe, The Call,” which purported the real purpose Moss had filed suit in the federal court system was to gain publicity in the San Francisco Chronicle, whose managers’ attitude toward bucket shopping was the same as Moss’s. He sought $100,000 in damages (about $2.5 million today).

In February 1912, Police Judge Charles Weller dismissed the cases against the Call men as baseless.

“So ends the legal farce, the shady and tricky misuse of the courts whereby the proscribed swindlers made their last stand against the inevitable. In none of these proceedings was there ever the slightest merit,” wrote the San Francisco Call (Feb. 18, 1912).

From Plaintiff To Defendant

Moss soon found himself the target of some civil suits. One, brought by an H.E. Churchill of Sacramento in 1912, claimed a male agent of Moss & Co. “induced” her to gamble in wheat by telling her it was like any other investment (San Francisco Call, Feb. 11, 1912). He subsequently persuaded her to bet more money, only to be informed later on that she’d lost all of it — $324 (about $7,000 today) — due to a turn in the market.

The judge required Moss to pay her back in full.

J.C. Robinson, a former San Francisco newspaperman, complained that on December 12, 1911, he’d arranged with Moss & Co. at its Oakland office to sell short, or bet against, 200 shares of stock at a certain price, and that he deposited $400 with the company to cover an advance. A month later, the stock had dropped seven points, paying a profit of $1,400 (about $33,000 today). All told, he was to get $1,800 — his original $400 investment plus his winnings. When he’d gone to cash in, he’d been told he had to go see Moss in San Francisco. There, Moss had informed him the business didn’t have enough money to pay him back in full and had given him a $200 check as partial payment. Moss & Co. hadn’t paid anything more.

Moss argued that because he hadn’t had a contract with Robinson — a violation of the state constitution — the deal was void and he didn’t owe the money.

The outcome of this case isn’t known. How do you think the judge should have ruled?

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