Lottery
Overview
 
A lottery is a form of gambling
Gambling
Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods...

 which involves the drawing of lots for a prize.

Lottery is outlawed by some governments, while others endorse it to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments. At the beginning of the 20th century, most forms of gambling, including lotteries and sweepstakes
Sweepstakes
The United States consumer sales promotion known as a sweepstake has become associated with marketing promotions targeted toward both generating enthusiasm and providing incentive reactions among customers by enticing consumers to submit free entries into drawings of chance...

, were illegal in many countries, including the U.S.A.
Encyclopedia
A lottery is a form of gambling
Gambling
Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods...

 which involves the drawing of lots for a prize.

Lottery is outlawed by some governments, while others endorse it to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments. At the beginning of the 20th century, most forms of gambling, including lotteries and sweepstakes
Sweepstakes
The United States consumer sales promotion known as a sweepstake has become associated with marketing promotions targeted toward both generating enthusiasm and providing incentive reactions among customers by enticing consumers to submit free entries into drawings of chance...

, were illegal in many countries, including the U.S.A. and most of Europe. This remained so until after World War II. In the 1960s casinos and lotteries began to appear throughout the world as a means to raise revenue in addition to taxes.
Lotteries come in many formats. For example, the prize can be a fixed amount of cash or goods. In this format there is risk to the organizer if insufficient tickets are sold. More commonly the prize fund will be a fixed percentage of the receipts. A popular form of this is the "50–50" draw where the organizers promise that the prize will be 50% of the revenue. Many recent lotteries allow purchasers to select the numbers on the lottery ticket, resulting in the possibility of multiple winners.

The purchase of lottery tickets cannot be accounted for by decision model
Decision model
A decision method is an axiomatic system that contains at least one action axiom.Formulation is the first and often most challenging stage in using formal decision methods...

s based on expected value
Expected value
In probability theory, the expected value of a random variable is the weighted average of all possible values that this random variable can take on...

 maximization. The reason is that lottery tickets cost more than the expected gain, so one maximizing expected value should not buy lottery tickets. Yet, lottery purchases can be explained by decision models based on expected utility maximization, as the curvature of the utility function can be adjusted to capture risk-seeking behavior. More general models based on utility functions defined on things other than the lottery outcomes can also account for lottery purchase. In addition to the lottery prizes, the ticket may enable some purchasers to experience a thrill and to indulge in a fantasy of becoming wealthy. If the entertainment value (or other non-monetary value) obtained by playing is high enough for a given individual, then the purchase of a lottery ticket could represent a gain in overall utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....

. In such a case, the disutility of a monetary loss could be outweighed by the combined expected utility of monetary and non-monetary gain, thus making the purchase a rational decision for that individual.

Early history

The first recorded signs of a lottery are Keno
Keno
Keno is a lottery or bingo gambling game often played at modern casinos, and is also offered as a game in some state lotteries. A traditional live casino keno game uses a circular glass enclosure called a "bubble" containing 80 balls which determine the ball draw result. Each ball is imprinted...

 slips from the Chinese Han Dynasty
Han Dynasty
The Han Dynasty was the second imperial dynasty of China, preceded by the Qin Dynasty and succeeded by the Three Kingdoms . It was founded by the rebel leader Liu Bang, known posthumously as Emperor Gaozu of Han. It was briefly interrupted by the Xin Dynasty of the former regent Wang Mang...

 between 205 and 187 B.C. These lotteries are believed to have helped to finance major government projects like the Great Wall of China
Great Wall of China
The Great Wall of China is a series of stone and earthen fortifications in northern China, built originally to protect the northern borders of the Chinese Empire against intrusions by various nomadic groups...

. From the Chinese "The Book of Songs" (second millennium B.C.) comes a reference to a game of chance as "the drawing of wood", which in context appears to describe the drawing of lots. From the Celtic era, the Cornish words "teulel pren" translates into "to throw wood" and means "to draw lots".
The Iliad
Iliad
The Iliad is an epic poem in dactylic hexameters, traditionally attributed to Homer. Set during the Trojan War, the ten-year siege of the city of Troy by a coalition of Greek states, it tells of the battles and events during the weeks of a quarrel between King Agamemnon and the warrior Achilles...

 of Homer refers to lots being placed into Agamemnon's helmet to determine who would fight Hector.

The first known European lotteries were held during the Roman Empire
Roman Empire
The Roman Empire was the post-Republican period of the ancient Roman civilization, characterised by an autocratic form of government and large territorial holdings in Europe and around the Mediterranean....

, mainly as an amusement at dinner parties. Each guest would receive a ticket, and prizes would often consist of fancy items such as dinnerware. Every ticket holder would be assured of winning something. This type of lottery, however, was no more than the distribution of gifts by wealthy noblemen during the Saturnalian revelries. The earliest records of a lottery offering tickets for sale is the lottery organized by Roman Emperor Augustus
Augustus
Augustus ;23 September 63 BC – 19 August AD 14) is considered the first emperor of the Roman Empire, which he ruled alone from 27 BC until his death in 14 AD.The dates of his rule are contemporary dates; Augustus lived under two calendars, the Roman Republican until 45 BC, and the Julian...

 Caesar. The funds were for repairs in the City of Rome, and the winners were given prizes in the form of articles of unequal value.

The first recorded lotteries to offer tickets for sale with prizes in the form of money were held in the Low Countries
Low Countries
The Low Countries are the historical lands around the low-lying delta of the Rhine, Scheldt, and Meuse rivers, including the modern countries of Belgium, the Netherlands, Luxembourg and parts of northern France and western Germany....

 in the 15th century. Various towns held public lotteries to raise money for town fortifications, and to help the poor. The town records of Ghent
Ghent
Ghent is a city and a municipality located in the Flemish region of Belgium. It is the capital and biggest city of the East Flanders province. The city started as a settlement at the confluence of the Rivers Scheldt and Lys and in the Middle Ages became one of the largest and richest cities of...

, Utrecht
Utrecht (city)
Utrecht city and municipality is the capital and most populous city of the Dutch province of Utrecht. It is located in the eastern corner of the Randstad conurbation, and is the fourth largest city of the Netherlands with a population of 312,634 on 1 Jan 2011.Utrecht's ancient city centre features...

, and Bruges
Bruges
Bruges is the capital and largest city of the province of West Flanders in the Flemish Region of Belgium. It is located in the northwest of the country....

 indicate that lotteries may be even older. A record dated May 9, 1445 at L'Ecluse
Sluis
Sluis is the name of both a municipality and a town located in the west of Zeelandic Flanders, in the south-western part of the Netherlands....

 refers to raising funds to build walls and town fortifications, with a lottery of 4,304 tickets and total prize money of 1737 florins. In the 17th century it was quite usual in the Netherlands to organize lotteries to collect money for the poor or in order to raise funds for all kinds of public usages. The lotteries proved very popular and were hailed as a painless form of taxation. The Dutch state-owned Staatsloterij is the oldest running lottery.

England, 1566–1826

Although the English probably first experimented with raffles and similar games of chance, the first recorded official lottery was chartered by Queen Elizabeth I, in the year 1566, and was drawn in 1569. This lottery was designed to raise money for the "reparation of the havens and strength of the Realme, and towardes such other publique good workes." Each ticket holder won a prize, and the total value of the prizes equalled the money raised. Prizes were in the form of silver plate and other valuable commodities. The lottery was promoted by scrolls posted throughout the country showing sketches of the prizes.

Thus, the lottery money received was an interest free loan to the government during the three years that the tickets ('without any Blankes') were sold. In later years, the government sold the lottery ticket rights to brokers, who in turn hired agents and runners to sell them. These brokers eventually became the modern day stockbrokers for various commercial ventures.
Most people could not afford the entire cost of a lottery ticket, so the brokers would sell shares in a ticket; this resulted in tickets being issued with a notation such as "Sixteenth" or "Third Class."

Many private lotteries were held, including raising money for The Virginia Company of London to support its settlement in America at Jamestown. The English State Lottery ran from 1694 until 1826. Thus, the English lotteries ran for over 250 years, until the government, under constant pressure from the opposition in parliament, declared a final lottery in 1826. This lottery was held up to ridicule by contemporary commentators as "the last struggle of the speculators on public credulity for popularity to their last dying lottery."

Early America, 1612–1900

An English lottery, authorized by King James I
James I of England
James VI and I was King of Scots as James VI from 24 July 1567 and King of England and Ireland as James I from the union of the English and Scottish crowns on 24 March 1603...

 in 1612, granted the Virginia Company of London
London Company
The London Company was an English joint stock company established by royal charter by James I of England on April 10, 1606 with the purpose of establishing colonial settlements in North America.The territory granted to the London Company included the coast of North America from the 34th parallel ...

 the right to raise money to help establish settlers in the first permanent English colony at Jamestown, Virginia.

Lotteries in colonial America played a significant part in the financing of both private and public ventures. It has been recorded that more than 200 lotteries were sanctioned between 1744 and 1776, and played a major role in financing roads, libraries, churches, colleges, canals, bridges, etc.
In the 1740s, the foundation of Princeton and Columbia Universities was financed by lotteries, as was the University of Pennsylvania by the Academy Lottery in 1755.

During the French and Indian Wars, several colonies used lotteries to help finance fortifications and their local militia. In May 1758, the State of Massachusetts raised money with a lottery for the "Expedition against Canada."

Benjamin Franklin
Benjamin Franklin
Dr. Benjamin Franklin was one of the Founding Fathers of the United States. A noted polymath, Franklin was a leading author, printer, political theorist, politician, postmaster, scientist, musician, inventor, satirist, civic activist, statesman, and diplomat...

 organized a lottery to raise money to purchase cannon for the defense of Philadelphia. Several of these lotteries offered prizes in the form of "Pieces of Eight."
George Washington's Mountain Road Lottery
Mountain Road Lottery
The Mountain Road Lottery was a project conceived in 1767 by George Washington, Captain Thomas Bullitt, and others. Captain Bullitt had served with Washington in the Virginia Regiment during the French and Indian War...

 in 1768 was unsuccessful. However, these rare lottery tickets bearing George Washington's signature have become collectors' items which sold for about $15,000 in 2007. Later, in 1769, Washington was a manager for Col. Bernard Moore's "Slave Lottery", which advertised land and slaves as prizes in the Virginia Gazette.

At the outset of the Revolutionary War, the Continental Congress used lotteries to raise money to support the Colonial Army. Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...

 wrote that lotteries should be kept simple, and that "Everybody ... will be willing to hazard a trifling sum for the chance of considerable gain ... and would prefer a small chance of winning a great deal to a great chance of winning little." Taxes had never been accepted as a way to raise public funding for projects, and this led to the popular belief that lotteries were a form of hidden tax.

At the end of the Revolutionary War the various states had to resort to lotteries to raise funds for numerous public projects. For many years these lotteries were highly successful and contributed to the nation's rapid growth. The lotteries were used for such diverse projects as the Pennsylvania Schuylkill – Susquehanna Canal (lottery in May 1795), and Harvard College
Harvard College
Harvard College, in Cambridge, Massachusetts, is one of two schools within Harvard University granting undergraduate degrees...

 (lottery in March 1806). Many American churches raised building funds through state authorized private lotteries.

However, lotteries eventually became a cause of financial mismanagement and scandal. Most notorious was the Louisiana State Lottery
Louisiana State Lottery Company
The Louisiana State Lottery Company was a private corporation that in the mid-19th century ran the Louisiana lottery. It was for a time the only legal lottery in the United States, and for much of that time had a very foul reputation as a swindle of the state and citizens and a repository of...

 (1868–1892) which was aptly called the "Golden Octopus" because its tentacles reached into every home in America.

Bolita
Bolita
Bolita , is a type of lottery which was popular in the latter 19th and early 20th centuries in Cuba and among Florida's working class Hispanic, Italian, and black population. In the basic bolita game, 100 small numbered balls are placed into a bag and mixed thoroughly, and bets are taken on which...

, a type of lottery popular in Cuba, was brought to Tampa, Florida in the 1880s and flourished in Ybor City's many Latin saloons.

Toward the end of the 19th century a large majority of state constitutions banned lotteries. Finally, on July 29, 1890, U.S. President Benjamin Harrison
Benjamin Harrison
Benjamin Harrison was the 23rd President of the United States . Harrison, a grandson of President William Henry Harrison, was born in North Bend, Ohio, and moved to Indianapolis, Indiana at age 21, eventually becoming a prominent politician there...

 sent a message to Congress demanding "severe and effective legislation" against lotteries. Congress acted swiftly, and banned the U.S. mails from carrying lottery tickets. The Supreme Court upheld the law in 1892, and that brought a complete halt to all lotteries in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 by 1900.

American lottery

The numbers game
Numbers game
Numbers game, also known as a numbers racket, policy racket or Italian lottery, is an illegal lottery played mostly in poor neighborhoods in the United States, wherein a bettor attempts to pick three digits to match those that will be randomly drawn the following day...

 operated out of "Policy shops", where bettors choose numbers, were in the U.S. prior to 1860. In 1875, a report of a select committee of the New York State Assembly
New York State Assembly
The New York State Assembly is the lower house of the New York State Legislature. The Assembly is composed of 150 members representing an equal number of districts, with each district having an average population of 128,652...

 stated that "the lowest, meanest, worst form ... [that] gambling takes in the city of New York, is what is known as policy playing." The game was also popular in Italian
Italian American
An Italian American , is an American of Italian ancestry. The designation may also refer to someone possessing Italian and American dual citizenship...

 neighborhoods known as the Italian lottery, and it was known in Cuban
Cubans
Cubans or Cuban people are the inhabitants or citizens of Cuba. Cuba is a multi-ethnic nation, home to people of different ethnic and national backgrounds...

 communities as bolita
Bolita
Bolita , is a type of lottery which was popular in the latter 19th and early 20th centuries in Cuba and among Florida's working class Hispanic, Italian, and black population. In the basic bolita game, 100 small numbered balls are placed into a bag and mixed thoroughly, and bets are taken on which...

("little ball").

By the early 20th century, the game was associated with poor communities, and could be played for as little as $0.01. One of the game's attractions to low income and working class bettors was the ability to bet small amounts of money. Also, unlike state lotteries, bookies could extend credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...

 to the bettor. In addition, policy winners could avoid paying income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...

. Different policy banks would offer different rates, though a payoff of 600 to 1 was typical. Since the odds of winning were 1000:1, the expected profit for racketeers was enormous.

When lotteries raised their head again in 1964, it would take many years of constitutional amendements by the various states before the lotteries were allowed to flourish again. On March 12, 1964, New Hampshire
New Hampshire Lottery
Begun in 1964, the New Hampshire Lottery is the oldest US mainland-based lottery. New Hampshire's games include Mega Millions, Powerball, Hot Lotto, and numerous scratch tickets.New Hampshire is part of the Multi-State Lottery Association , which it joined in 1995...

 became the first state to sell lottery tickets in the modern era.

Probability of winning

The chances of winning
Probability
Probability is ordinarily used to describe an attitude of mind towards some proposition of whose truth we arenot certain. The proposition of interest is usually of the form "Will a specific event occur?" The attitude of mind is of the form "How certain are we that the event will occur?" The...

 a lottery jackpot can vary widely depending on the lottery design, and are determined by several factors, including the count of possible numbers, the count of winning numbers drawn, whether or not order is significant, and whether drawn numbers are returned for the possibility of further drawing.

In a 6-from-49 lotto
Pick 6 (lottery)
A six-number lottery game, often having Pick-6 or Lotto as part of its name, is a form of lottery in which six numbers are drawn from a larger pool . Winning the top prize, usually a jackpot, requires a player to match all six regular numbers drawn; the order in which they are drawn is irrelevant...

, a player chooses six numbers from 1 to 49 (no duplicates are allowed). If all six numbers on the player's ticket match those produced in the official drawing, then the player is a jackpot winner. This is true regardless of the order in which the numbers are drawn. For such a lottery, the chance of being a jackpot winner is 1 in 13,983,816 (note that most lotteries have much worse odds).' The derivation of this result (and other winning odds) is shown in the Lottery mathematics
Lottery mathematics
Lottery mathematics is used here to mean the calculation of the probabilities in a lottery game. The lottery game used in the examples below is one in which one selects 6 numbers from 49, and hopes that as many of those 6 as possible match the 6 that are randomly selected from the same pool of 49...

 article. To put these odds in perspective, suppose a person buys one lottery ticket per week.
In a quarter-million years of play, the person would be expected to win the jackpot only once (13,983,816 weeks is roughly 269,000 years). Or a ticket every other second for one year, he would probably win the jackpot just once.

Mega Millions
Mega Millions
Mega Millions is a US multi-jurisdictional $1 lottery game. Since it replaced The Big Game in May 2002 , Mega Millions' advertised jackpots have started at $12 million, paid in 26 yearly installments , increasing when there is no jackpot winner...

 is a very popular multi-state lottery in the United States which is known for jackpots that grow very large from time to time. This attractive feature is made possible simply by designing the game to be extremely difficult to win: 1 chance in 175,711,536. That's over twelve times higher than the example above. Mega Millions players also pick six numbers, but two different groups of numbers are used. The first five numbers come from one group that contains numbers from 1 to 56. The sixth number – the "Mega Ball number" – comes from the second group, which contains numbers from 1 to 46. To win a Mega Millions
Mega Millions
Mega Millions is a US multi-jurisdictional $1 lottery game. Since it replaced The Big Game in May 2002 , Mega Millions' advertised jackpots have started at $12 million, paid in 26 yearly installments , increasing when there is no jackpot winner...

 jackpot, a player's first five numbers must match the first five numbers drawn and the Mega Ball number chosen must match the Mega Ball number drawn. In other words, it is not good enough to pick 10, 18, 25, 33, 42 / 7 when the drawing is 7, 10, 25, 33, 42 / 18. Even though the player picked all the right numbers, the Mega Ball number at the end of the ticket doesn't match the one drawn, so the ticket would be credited with matching only four numbers (10, 25, 33, 42).

The SuperEnalotto
SuperEnalotto
SuperEnalotto is a lottery that has been played in Italy since 3 December 1997. Draws take place on Tuesdays, Thursdays and Saturdays at 8:00 PM. The jackpots won are among the largest in the world, and the odds of winning the worst in the world....

 of Italy is possibly the most difficult, as players try to match 6 numbers out of 90. The odds in making the jackpot are 1 in 622,614,630, while the odds of matching 5 numbers are 1 in 1,235,346

Most lotteries give lesser prizes for matching just some of the winning numbers. The Mega Millions game is an extreme case, giving a very small payout (US$2) even if a player matches only the final Mega Ball number on the ticket. The weekly 6/49 lottery operated by the ILLF offers a two-ball cash prize to make the odds of winning some prize only 1 in 6.63. Matching more numbers, the payout goes up. Although none of these additional prizes affect the chances of winning the jackpot, they do improve the odds of winning something and therefore add a little to the value
Value (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...

 of the ticket. On the other hand, multiple smaller prizes usually mean smaller jackpots. It is very common for the jackpot to be split evenly if multiple players have tickets with all the winning numbers.

In the UK National Lottery the smallest prize is £10 for matching three balls.

It is a hard, in most cases open, mathematical problem to calculate the minimum number of tickets one needs to buy to guarantee that at least one of these tickets has (at least) 2 matches or 3 matches, etc. In the 5-from-90 lotto this minimum number that can guarantee a ticket with at least 2 matches is exactly 100. The odds of a guaranteed 3 matches is 57.

The expected value
Expected value
In probability theory, the expected value of a random variable is the weighted average of all possible values that this random variable can take on...

 of lottery bets is often notably low. In the United States, an expected value of 50% of the purchase price is available only in the small-payout, non-jackpot games. For example, when a player buys a "pick-4" lottery ticket for $1.00, he might be getting a ticket with an expected value of only $0.50. Hence, buying a lottery ticket reduces the buyer's expected net worth. This is in sharp contrast with financial securities like stocks and bonds whose prices are theoretically based on their economic value, as judged by the markets at any given point in time.

Lotteries are sometimes described as a regressive tax
Regressive tax
A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, where the average tax rate exceeds the...

, albeit a voluntary one, since those most likely to buy tickets, and to spend a larger proportion of their money on them, are typically less affluent people. The astronomically high odds against winning the larger prizes have also led to the epithets of a "tax on stupidity" and a "math tax". Although the use of the word "tax" is not strictly correct, these descriptions are intended to suggest that lotteries are government-sanctioned operations which will attract only those people who fail to understand that buying a lottery ticket is a poor economic decision. Indeed, after taking into account the present value
Present value
Present value, also known as present discounted value, is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk...

 of a given lottery prize as a single lump sum cash payment, the impact of any taxes that might apply, and the likelihood of having to share the prize with other winners, it is not uncommon to find that a ticket for a major lottery is worth less than one third of its purchase price. In other words, if a lottery ticket costs US$1 to purchase, its true economic worth may be only US$0.33 or so at the time of purchase. Of course, this is just a hypothetical example, and the actual value will depend on the details of each lottery. Some lotteries may offer tickets that are worth less than 20% of their price, while others may be worth over 50%. To raise money, lottery operators must offer tickets worth much less than what one pays for them, so the lottery is a bad choice for customers trying to come out ahead.

In a famous occurrence, a Polish-Irish businessman named Stefan Klincewicz bought up almost all of the 1,947,792 combinations available on the Irish lottery
National Lottery (Ireland)
The National Lottery is the state lottery of Ireland. It was founded when the Oireachtas passed the to support initiatives in the areas of sport and recreation, health and welfare, national heritage and the arts, and the Irish language. Since gaming operations began on 23 March 1987, over €3.6...

. He and his associates paid less than one million Irish pound
Irish pound
The Irish pound was the currency of Ireland until 2002. Its ISO 4217 code was IEP, and the usual notation was the prefix £...

s while the jackpot stood at £1.7 million. There were three winning tickets, but with the "Match 4" and "Match 5" prizes, Klincewicz made a small profit overall.

Side-effects

There can be some problems associated with winning a lottery jackpot. There are security and safety risks associated with publicly announcing the lottery winners such as holding family members for ransom. In addition, Winners sometimes feel anomie
Anomie
Anomie is a term meaning "without Law" to describe a lack of social norms; "normlessness". It describes the breakdown of social bonds between an individual and their community ties, with fragmentation of social identity and rejection of self-regulatory values. It was popularized by French...

 from the dramatic change of lifestyles.

Scams and frauds

Lottery, like any form of gambling, is susceptible to fraud, despite the high degree of scrutiny claimed by the organizers.

Rigging the machine

One method involved is to tamper with the machine used for the number selection. By rigging a machine, it is theoretically easy to win a lottery or, with modern computerized systems that collects in advance the combinations of numbers played, the lottery firm can rig the drawing machine to draw a NON-winning combination in order to carry over the next drawings the chance of winning the jackpot. This act is often done in connivance with an employee of the lottery firm. Methods used vary; loaded balls where select balls are made to pop-up making it either lighter or heavier than the rest, a drawing machine that uses balls identified with RF chips and validate just the balls from a specified set while the rest introduced are not recognized by the machine.

Raffle scam

In some US states, such as Kansas
Kansas
Kansas is a US state located in the Midwestern United States. It is named after the Kansas River which flows through it, which in turn was named after the Kansa Native American tribe, which inhabited the area. The tribe's name is often said to mean "people of the wind" or "people of the south...

 and Minnesota
Minnesota
Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...

, losing lottery tickets can be mailed in for a raffle
Raffle
A raffle is a competition in which people obtain numbered tickets, each ticket having the chance of winning a prize. At a set time, the winners are drawn from a container holding a copy of every number...

 of special prizes. The trouble with that is that employees of stores that sell lottery tickets sometimes collect the lottery tickets that are thrown away and send them in. As a lottery official put it, "the retailers have an unlimited supply of free tickets. You do not need to be an FBI agent to realize that is a tremendously unfair advantage."

Advance fee fraud

Some advance fee fraud
Advance fee fraud
An advance-fee fraud is a confidence trick in which the target is persuaded to advance sums of money in the hope of realizing a significantly larger gain...

 scams on the Internet are based on lotteries. The fraud starts with spam
E-mail spam
Email spam, also known as junk email or unsolicited bulk email , is a subset of spam that involves nearly identical messages sent to numerous recipients by email. Definitions of spam usually include the aspects that email is unsolicited and sent in bulk. One subset of UBE is UCE...

 congratulating the recipient on their recent lottery win. The email explains that in order to release funds the email recipient must part with a certain amount (as tax/fees) as per the rules or risk forfeiture.

Blackmail

Another form of lottery scam
Lottery scam
A lottery scam is a type of advance-fee fraud which begins with an unexpected email notification that "You have won!" a large sum of money in a lottery...

 involves the selling of "systems" which purport to improve a player's chances of selecting the winning numbers in a Lotto game. These scams are generally based on the buyer's (and perhaps the seller's) misunderstanding of probability and random numbers. Sale of these systems or software is legal, however, since they mention that the product cannot guarantee a win, let alone a jackpot.
Several companies offer a service where they will buy tickets for online clients in any of dozens of countries otherwise inaccessible to them, for a massive mark up, of many hundred per cent.
Some national and international lotteries have residency and minimum age requirements.

Others

There have also been several cases of cashiers at gas & convenience stores who have attempted to scam customers out of their winnings. Some locations require the patron to hand the lottery ticket to the cashier to determine how much they have won, or if they have won at all, the cashier then scans the ticket to determine one or both. In cases where there is no visible or audible cue to the patron of the outcome of the scan some cashiers have taken the opportunity to claim that the ticket is a loser or that it is worth far less than it is and offer to "throw it away" or surreptitiously substitute it for another ticket. The cashier then pockets the ticket and eventually claims it as their own.

Lotteries in popular culture

In George Orwell
George Orwell
Eric Arthur Blair , better known by his pen name George Orwell, was an English author and journalist...

’s novel 1984
Nineteen Eighty-Four
Nineteen Eighty-Four by George Orwell is a dystopian novel about Oceania, a society ruled by the oligarchical dictatorship of the Party...

, in Oceania there are frequent large lotteries and the proles
Proles
Proles is a term used in George Orwell's novel Nineteen Eighty-Four to refer to the working class of Oceania ....

 buy lottery tickets hoping for a big win. The relevant section of the book hypothesizes that the "large winners" are amongst the things manufactured with Party propaganda.
Lotteries are also a popular theme in film and television fiction.

Notable prizes

Notable prizes on different continents are:
Prize
(local currency)
Lottery Country Winner Date Notes
$ 390 million Mega Millions
Mega Millions
Mega Millions is a US multi-jurisdictional $1 lottery game. Since it replaced The Big Game in May 2002 , Mega Millions' advertised jackpots have started at $12 million, paid in 26 yearly installments , increasing when there is no jackpot winner...

Won by one ticket holder from New Jersey and one from Georgia. 6 March 2007 World's largest jackpot
€ 185 million or £161 million EuroMillions
EuroMillions
EuroMillions is a transnational lottery, launched on 7 February 2004 by France's Française des Jeux, Spain's Loterías y Apuestas del Estado, and the United Kingdom's Camelot. The first draw was held on Friday 13 February 2004 in Paris...

Colin and Chris Weir 12 July 2011 Europe's largest jackpot
₱ 741 million Grand Lotto 6/55
Philippine Lotto Draw
The Philippine Lotto Draw is a television program in the Philippines. Produced by the Philippine Charity Sweepstakes Office and it is aired on the People's Television Network since March 8, 1995. The draw is also simulcast live on AM radios DZME and DZRH, both licensed in Mega Manila...

 Philippines One ticket holder from Olongapo City
Olongapo City
The City of Olongapo is a highly urbanized city located in the province of Zambales, Philippines. According to the latest census, it has a population of 227,270 people in 50,300 households.-History:...

29 November 2010 Asia's largest prize (€13m)
R$ 195 million Mega-Sena
Mega-Sena
The Mega-Sena is the largest lottery in Brazil, held by the Caixa Econômica Federal bank.-Drawings:Drawings happen twice a week, on Wednesdays and Saturdays. The drawings consist of picking globes from 2 spinning spherical cages. They are picked in pairs, in order to form a 2 digit decimal number...

Four winners 31 December 2010 South America's largest prize
AUS$ 106 million OZ lotto Two winners 30 June 2009 Australia's highest
lottery prize

Payment of prizes

Winnings (in the U.S.) are not necessarily paid out in a lump sum
Present value
Present value, also known as present discounted value, is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk...

, contrary to the expectation of many lottery participants. In certain countries, mainly the U.S., the winner gets to choose between an annuity payment and a one-time payment. The one-time payment (cash or lump sum) is a "smaller" amount than the advertised (annuity) jackpot, even before applying any withholdings to which the prize is subject to. While withholdings vary by jurisdiction and how winnings are invested, it is suggested that a winner who chooses lump sum expects to pocket 1/3 of the advertised jackpot at the end of the tax year. Therefore, a winner of a $100,000,000 jackpot who chooses cash can expect $33,000,000 net after filing income tax document(s) for the year in which the jackpot was won.

Lottery annuities often are for a period from 20 to 30 years. Some U.S. lottery games, especially those offering a "lifetime" prize, do not offer a lump-sum option.

In some online lotteries, the annual payments are only $25,000, with a balloon payment
Balloon payment
When a debt is repaid in payments of varying amounts there are some colourful jargon terms used to describe the different loan structures. The term balloon payment arises because if you hold back most of a debt and pay it only towards the end of the agreement, both those last payments and the total...

 in the final year. This type of installment payment often is made through investment in government-backed securities. Online lotteries pay the winners through their insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

 backup. However, many winners choose lump sum, since they believe they can get a better rate of return on their investment elsewhere.

In some countries, lottery winnings are not subject to personal income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...

, so there are no tax consequences to consider in choosing a payment option. In Canada, Australia, Germany, Ireland, Italy, and the United Kingdom all prizes are immediately paid out as one lump sum, tax-free to the winner. In Liechtenstein, all winnings are tax-free and the winner may opt to receive a lump sum or an annuity with regard to the Jackpot prizes.

In the US, federal courts have consistently held that lump sum payments received from third parties in exchange for the rights to lottery annuities are not capital assets for tax purpose. Rather, the lump sum is subject to ordinary income tax treatment.

Rollovers and Roll Downs

When there is no winning ticket for a lottery then the prize is said to Rollover to the following week leading to notable increases in prize funds. If a lottery hits a certain threshold of Rollovers then the total prize fund becomes automatically payable and is paid to the lower tier of winners. In the case of the Euromillions lottery the draw of 22 September 2007 lead to a total of 20 winners sharing a Roll Down jackpot of € 180 million or $230 million

Non-randomness

In 2011, it was reported that Joan R. Ginther, a statistics professor, had won four different multi-million dollar jackpots from purchasing scratch-off lottery tickets in Texas. It was speculated that there was actually a pattern to where and when the winning tickets were sold, and that Professor Ginther had figured out this pattern.

See also

  • Betting pool
    Betting pool
    A betting pool, sports lottery, sweep or office pool if done at work, is a form of gambling, specifically a variant of parimutuel betting influenced by lotteries, where gamblers pay a fixed price into a pool , and then make a selection on some outcome, usually related to sport...

  • Combinatorial number system
  • Gambling
    Gambling
    Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods...

  • Gaming mathematics
    Gaming mathematics
    Gaming mathematics, also referred to as the mathematics of gambling, is a collection of probability applications encountered in games of chance and can be included in applied mathematics...

  • GTech Corporation
    GTECH Corporation
    GTECH Corporation, a company based in Providence, Rhode Island, United States, became a wholly owned subsidiary of Lottomatica, S.p.A., on August 29, 2006.-Holdings:...

  • Intralot
    Intralot
    Intralot is a Greek company that supplies integrated gaming, transaction processing systems, game content ,sports betting management and Interactive Gaming Services, to state-licensed gaming organizations worldwide. The company acts both as a lottery vendor and a lottery operator...

  • Keno
    Keno
    Keno is a lottery or bingo gambling game often played at modern casinos, and is also offered as a game in some state lotteries. A traditional live casino keno game uses a circular glass enclosure called a "bubble" containing 80 balls which determine the ball draw result. Each ball is imprinted...

  • Lotology
    Lotology
    Lotology is the hobby of collecting lottery tickets. While Lotologists collect all types of lottery tickets, the primary collectibles are "scratch off" lottery tickets.There are three primary types of collections:...

  • Lotteries by country
    Lotteries by country
    A lottery is a form of gambling which involves the drawing of lots for a prize. Lottery is outlawed by some governments, while others endorse it to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments...

  • Lottery payouts
    Lottery payouts
    Lottery payouts are the way lottery winnings are distributed. Payouts can be over years, such as with US lottery winnings.Legislation varies by US jurisdiction; much attention has been given to payout rates. Many statutes specify minimum payouts. To make lotteries competitive, some jurisdictions...

  • Lottery Wheeling
    Lottery Wheeling
    Lottery wheeling is a method of arranging lottery ticket numbers in a way that will allegedly improve chances to win multiple-tier lottery prizes. Wheeling was designed for players who wish to play more numbers than the set required for a lottery ticket...

  • Scratchcard
    Scratchcard
    A scratchcard is a small card, often made of thin paper-based card for competitions and plastic to conceal PINs, where one or more areas contain concealed information which can...


Further reading

  • A History of English Lotteries, by John Ashton, London: Leadenhall Press, 1893
  • Fortune's Merry Wheel, by John Samuel Ezell, Harvard University Press
    Harvard University Press
    Harvard University Press is a publishing house established on January 13, 1913, as a division of Harvard University, and focused on academic publishing. In 2005, it published 220 new titles. It is a member of the Association of American University Presses. Its current director is William P...

    , 1960.
  • Lotteries and Sweepstakes, 1932 by Ewen L'Estrange
  • The Lottery Encyclopedia, 1986 by Ron Shelley (NY Public Library)
  • Fate's Bookie: How The Lottery Shaped The World by Gary Hicks, History Press, 2009

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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