What is a Lottery?

A competition based on chance in which tickets bearing numbered numbers are sold and prizes are given to the holders of those selected at random, usually sponsored by a state as a means of raising money. The term is also used for any undertaking involving chance selections, including combat duty, in which lottery-like drawings are used to determine assignments.

In a cash lottery, participants purchase tickets to win a prize, often a large sum of money. People spend more than $80 billion a year on lotteries, even though the odds of winning are extremely slim. It is a form of gambling, and one that carries with it the implicit message that anyone can be rich if they only try hard enough. While the idea of wealth through a lottery has a long record in human history—including several examples in the Bible—the modern practice of distributing cash prizes to participants is considerably younger.

The modern state lottery is a complex and relatively recent invention. It evolved out of a growing awareness that the state needed revenue to provide basic services without heavy taxation of the middle class and working classes. It also was influenced by the success of illegal gambling and other forms of gambling.

States adopted a variety of approaches to introduce a lottery, but the essential elements were similar: the state legislated a monopoly for itself; established an agency or public corporation to run the lottery; began operations with a modest number of games and, under pressure to generate revenues, progressively added new ones. While the early years of a lottery saw substantial growth in player numbers and revenues, that expansion eventually leveled off. Moreover, the lottery’s overall costs, ranging from prizes to promotional expenses, normally deducted a significant percentage of the total pool before any winners are identified.

Until recently, many states viewed the lottery as a way to fill a “rainy day fund,” a safety net that would cushion the impact of economic or social crisis. During the Great Recession, that view changed. State leaders shifted from seeing the lottery as an attractive alternative to higher taxes to viewing it as a way to eliminate them altogether.

The lottery is also seen as a way to give the poor a shot at the American dream, by offering them opportunities to get out of poverty through a stroke of luck. That vision of the lottery has created a large, loyal base of support for its operation, but there is an ugly underbelly that has emerged.

The bulk of lottery players and revenues are drawn from the 21st through 60th percentiles of the income distribution, a group that includes people with a few dollars in discretionary spending but little opportunity to advance in the job market or to start their own businesses. These are people who play the lottery at disproportionately high levels and whose participation may well be regressive. Those in the very lowest quintile, however, are unlikely to be able to afford a ticket and do not play at all.