How the Lottery Works

The lottery is a fixture in our society, with Americans spending billions on tickets each year. States promote lotteries as a way to raise money for children and other state programs. And they are right — lottery proceeds do boost state budgets. But just how meaningful that revenue is, and what the trade-offs are, is worth scrutiny.

Most state lotteries are monopolies, with the state government granting itself exclusive rights to sell and operate them. Unlike private businesses, these monopolies are exempt from competition laws and do not have to disclose their operations to the public. As a result, state lotteries tend to be opaque and secretive. But they also are effective at building loyalty among specific constituencies, including convenience store operators (the usual vendors); lottery suppliers (heavy contributions from suppliers to state political campaigns are often reported); teachers (in those states in which lotteries provide a significant portion of school funds) and, of course, state legislators (who become accustomed to the extra revenue).

In the United States, most state-sponsored lotteries take the form of traditional raffles, with the public purchasing tickets in advance of a drawing weeks or months in the future. The prizes are typically relatively small, and the odds of winning are slim. But innovations in the 1970s led to the introduction of “instant games,” which offered lower prize amounts but greater frequency of wins and substantially better odds. Instant games are more popular than traditional lotteries, and they have made up a significant share of total state lotto sales.

Lotteries have enjoyed broad public support, and this has been especially true in times of economic stress, when they are seen as a painless source of revenue that does not require a tax increase or reduction in other state programs. But there is a less-recognized dynamic at work: the lottery creates a false sense of public consensus that everyone will eventually win, combining irrational gambling behavior with a meritocratic belief that we are all entitled to someday be rich.

Lottery enthusiasts are aware of the odds and have their own quote-unquote systems that they use to pick numbers, find lucky stores or times of day to buy tickets, etc. But they still believe, deep down, that the longshot is their only shot at a new life. This is a troubling feeling to have, and it makes lottery players less likely to save for retirement or college tuition. And it is a big reason why many low-income people, who are the primary target audience for lotteries, don’t play. They simply don’t have the money. And that is the real shame of lottery gambling. It is a regressive tax that primarily hurts poor people and their children. In addition, the odds of winning are incredibly slim, and those who do win can sometimes find themselves worse off than they were before the jackpot. This is a problem that needs to be addressed. State legislatures should review their policies and consider limiting the size of prizes or increasing the frequency of drawings.