The Lottery Industry


Lottery is a form of gambling in which people pay a small sum to have a chance of winning a larger sum. Governments have used lotteries to raise money for a variety of public works projects and programs. These include paying for soldiers in the Revolutionary War, constructing the British Museum, and repairing bridges. Governments also use lotteries to supplement taxes or to replace sin taxes, such as on tobacco and alcoholic beverages. Some people argue that replacing taxes with lotteries amounts to taxation by whim, but others contend that the ill effects of lottery gambling are nowhere near those of alcohol and tobacco, which have been taxed for similar reasons.

The idea of determining the distribution of property or other items by drawing lots has a long record, including some biblical instances. Roman emperors held public lotteries to provide for repairs in the city, and medieval European towns often had lotteries as entertainment for their guests at dinner parties or other events. The first recorded lotteries to offer tickets for prizes in the form of money were held in the Low Countries in the 15th century to raise funds for town fortifications or help the poor. The name lotteries probably derives from the Middle Dutch word lottery, or possibly from the Old French word loterie, which means “action of drawing lots.”

In modern times, lottery operations typically follow the same general pattern: the state legislature creates a monopoly for itself; establishes a state agency to run the lottery (as opposed to licensing private firms in return for a cut of profits); starts with a modest number of relatively simple games; and then, under constant pressure to increase revenues, progressively adds new games and increases the size and complexity of existing ones. The resulting industry has grown to be one of the world’s largest, generating billions of dollars in revenue each year and offering the potential to raise much more.

While the glitz and glamour of lottery advertising has obscured its regressive nature, critics have focused on a number of specific issues that arise from the operation of a lottery. Some of these concern the regressive impact on lower-income individuals and groups, and the problem of compulsive gambling. Others are more abstract, such as the alleged replacement of taxes by hidden fees or a lack of accountability for lottery revenues.

Regardless of the specific issues, the fact remains that lottery play is popular and generates a great deal of money for state governments. In states where the lottery is legal, approximately 60% of adults report playing it at least once a year. Lottery revenues benefit convenience store owners, who tend to be the primary vendors; suppliers of equipment and supplies for the games; the operators of a lottery’s official website; and teachers (in those states in which lottery proceeds are earmarked for education). The popularity of the lottery is attested by the fact that no state has ever abolished it.