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America's fascination with the game of chance is as old as the nation itself. Lotteries were a common way to raise money for public works in Colonial America, but they fell out of favor in the 19th century, perceived as contrary to the culture of hard work, rectitude, and saving. Federal anti-lottery legislation in the 1890s closed the door on them for three quarters of a century. And when New Hampshire launched the first modern state lottery, in 1964, it made sure to hire a former FBI agent to run it.
Today, lotteries are a fixture in 42 states and the District of Columbia and are likely only to grow in popularity in the months ahead as governments around the nation struggle with budget shortfalls. The games have, understandably, become a favorite crutch for legislatures looking to raise money without hiking taxes. Ordinary Americans seem to love them too—even though the odds of hitting a life-changing payday remain minuscule. The chance of winning an extra ticket or a couple of bucks runs to about 1 in 4, but the odds of hitting the 30-state Powerball jackpot are roughly 1 in 146 million. (Your odds of making two holes in one in the same round of golf: as slim as 1 in 67 million.) States raised $17.4 billion for their budgets in 2007. Most spend a portion of that income on education, but many have found other creative outlets. In Kansas and Iowa, lottery money pays for compulsive-gambling programs; Montana and Wisconsin have used it for property tax relief. Over the years, Washington State has spent $49.9 million of its lottery revenues on a baseball stadium and put $76.5 million toward a football arena and convention center.
The smaller instant prizes, surprisingly, are the engines of growth. Ten- and twenty-dollar tickets are now routine, and scratch-off games now make up about half of lottery sales. Their steady stream of $100 prizes means that regular players can win every few weeks. They tell their friends, who buy, win—and tell theirs.
Do You Feel Lucky?
A few random facts about random-chance lotteries and the money trail.
$58.4 billion: How much we spent on thelottery in 2007.
30%: Amount states kept as profits.
$1.1 billion: California's total lottery profits.
1.5%: Portion of California's education budget that comes from the lottery.
$8.50: Amount a college-educated player spends on the lottery each month in Texas.
$16: Amount spent each month by the typical player without a high school degree.
49: West Virginia's rank in median household income.
1: West Virginia's rank in state lottery profits per capita.
$315 million: Biggest lottery jackpot claimed by a single winner.
$51.7 million: Biggest unclaimed jackpot.
Flash Points
Folks with gambling problems make up a minority of players, but they buy more tickets: Just 5 percent of lottery players buy a full 54 percent of the tickets. The National Council on Problem Gambling (a group funded partly by the gaming industry, not exactly a lottery foe) says low-income players are more likely to expect they'll come out ahead.
Six state lotteries have introduced video lottery machines that are closer in spirit to casino slot machines than traditional lottery games. Not coincidentally, these states typically rake in more profits. Critics call them “video crack.”
Critics also claim that too much of the lottery's take goes back out as prizes-about 53 percent nationwide in 2007. But some of the states that pay out the best prizes also raise the most money. Massachusetts pays out about 72 percent of its $4.7 billion in ticket sales but still earns $913 million in profits, among the highest of any state.
Opposition to the games has allied some religious groups (who oppose gambling on principle) with antipoverty advocates (who say lotteries take advantage of less educated, lower-income players, who are among the most faithful customers).
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