How Important is the Lottery to State Budgets?


The lottery is a popular form of gambling, and in America people spend over $80 billion per year on tickets. In the US, state governments promote it as a way to raise money for education or other state programs. But just how important this revenue stream really is to a state budget, and whether it’s worth the cost of people losing money on tickets, is debatable.

Lottery is a game of chance in which prizes are awarded by drawing lots. Prizes may be cash, goods, services, or other prizes. The earliest known lotteries are found in the Low Countries during the 15th century, where town records show that they were used to raise funds for wall construction and town fortifications. The word “lottery” dates back to the late 15th century, from Middle Dutch lotterie and from Old English hlot or hlotto, from Germanic lotton “lot, portion, share.” Today, the term refers to any arrangement in which prizes are awarded by chance.

In a modern lottery, prizes are awarded to the winners of a drawing conducted by computer software, which draws lots from entries submitted by players. The computer software is programmed to select a winner for each draw using a process that involves checking for duplicate entries, eliminating any entries from the drawing that don’t meet minimum requirements, and then choosing a winner from the remaining entries. In addition, the software will verify that all entries have been submitted correctly.

Most states have laws governing lottery games, and some even operate their own state-sponsored lotteries. These agencies may hire retailers to sell tickets, train employees of those retailers to use lottery terminals, select and license lottery retailers, oversee the distribution of lottery proceeds, pay high-tier prizes to players, assist retailers in promoting the lottery, and monitor compliance with lottery laws. In most cases, the prizes offered in a state-sponsored lottery are based on the total value of all entries in the drawing, less expenses for promotion and taxes.

Despite the odds of winning, people still play the lottery because they want to believe that they’ll be the one lucky person who wins. This hope, as irrational and mathematically impossible as it is, offers a psychological benefit that may be more valuable than the money lost on a ticket. This hope also reinforces the message that money is a magic bullet that will solve all of life’s problems—despite the fact that God forbids coveting wealth (Exodus 20:17).

The state-sponsored lotteries are run by corporations that are often not transparent about how they’re spending the proceeds from ticket sales. Many consumers don’t realize that they are paying a hidden tax with each ticket purchase, and that the percentage of proceeds paid for prizes is often much lower than advertised. This hidden tax is a large reason why the average jackpot for a major lottery is so small. It’s a big reason why some states are moving to reform the lottery. They’re trying to make it more fair, more transparent, and less likely to reward bad behavior.