The Lottery – A Popular Source of Revenue For Many States and Municipalities


The lottery is a popular source of revenue for many states and municipalities. In fact, sales of lotteries have increased across the U.S. for decades. States such as California, Florida, Illinois, Indiana, Kansas, Missouri, Nevada, Pennsylvania, Texas, Washington, and West Virginia all have lotteries. A few other jurisdictions also offer the lottery.

The NGISC’s final report criticized state governments for encouraging lottery play by promoting luck, instant gratification, and entertainment. Nevertheless, a study of lottery ticket purchases by South Carolina showed that more than half of those surveyed chose the same lottery ticket each week. In addition, a study showed that lottery players do not get discouraged if their lottery numbers don’t come up on the first draw. This behavior is known as the gambler’s fallacy. The probability of winning increases the longer a player plays the lottery.

Lotteries encourage widespread media coverage of winners. There is also an economic benefit for lottery operators. The money raised by lotteries helps fund state governments and benefit smaller businesses that sell tickets. Additionally, the lottery also generates profit for larger companies that invest in advertising and marketing campaigns. In addition, the lottery provides inexpensive entertainment for individuals.

The New Jersey Lottery Commission recently announced a prize of a Harley-Davidson motorcycle in a scratch-off game. Among lottery players, African-Americans spend more than any other income group, and they spend nearly four times as much as high school dropouts. The NGISC final report also noted that a large number of lottery outlets are located in poor neighborhoods.

In FY 2003, Americans wagered $44 billion in lottery games. That was an increase of 6.6% over the previous year, and continues a steady upward trend between 1998 and 2003. The New York lottery has the highest cumulative sales of any state lottery in the U.S. and the largest profit margin of any state lottery.

In 2003, nearly 186,000 retail locations sold lottery tickets. Most were located in California, Texas, and New York. About three-fourths of these outlets also offer online services. In addition, approximately half of lottery retailers are convenience stores. Nonprofit organizations, service stations, restaurants, bars, and newsstands are other common lottery outlets.

One recent case highlights the potential for lottery fraud and money laundering. An ex-live-in boyfriend in Brooklyn won $1.6 million from her lottery jackpot. The woman had sued him for breach of an oral contract stating that she and her boyfriend would split the winnings. While he denied he would split the winnings, the clerk at the store where the ticket was purchased testified against him. The court awarded the plaintiff with half of the after-tax amount of the jackpot, as well as attorneys’ fees and punitive damages.

The decision to join Mega Millions was challenged on constitutional grounds. The plaintiffs argued that the participation in Mega Millions would divert lottery profits from education programs. But in July 2004, a state appeals court ruled that the administrative costs associated with the lottery’s participation were so low that it would not constitute diversion of funds.