The drawing of lots probably constitutes the oldest form of gambling, and in modern times these games are the most prevalent form of gambling. Public opinion polls also show that the public approves of legalization of lotteries more than any other form of gambling.
History and Development
There is evidence that lottery games were played in ancient China, India, and Greece. The “drawing of lots” constitutes most of the references to “gambling” in the Holy Bible. The technical elements of gambling may not necessarily have been present, however, in all the biblical situations, as lots were used mostly for decision making.
Lotteries were part of Roman celebrations. They were used at Roman parties to present gifts to guests, much as door prizes are given at parties and events today. Lotteries were also found in the Middle Ages, as merchants used drawings to dispose of items that could not otherwise be sold.
The first lottery game based upon purchases of tickets and awards of money prizes was instituted in the Italian city-state of Florence in 1530. Word of its success spread quickly, as France had a lottery drawing in 1533. The English monarch authorized a lottery that began operations in 1569. The English lotteries were licensed by the crown, but they were operated by private interests. One of the first lotteries held was for the benefit of the struggling Virginia Colony in North America. The 1612 drawing was held in London. Lotteries were soon being conducted in Virginia and the other colonies, however. It cannot be known for certain when the first lottery occurred in North America, as Spanish royalty had also approved of lotteries and may have held drawings in their colonial possessions. And, of course, Native Americans had games which encompassed the attributes of lotteries.
Lotteries were very popular throughout the seventeenth and eighteenth centuries in North America, and they were utilized both by governments and private parties. As in the Middle Ages, merchants used lotteries to empty shelves of undesired or very high priced goods. Individuals would do the same when they wished to sell estates, and no persons had sufficient capital to purchase large holdings. Institutions used lotteries to fund many building projects – for both public and private use. Canals, bridges, and roads were funded through lotteries, as banking institutions and bonding mechanisms were not yet developed in the colonies.
The reconstruction of Boston’s Faneuil Hall in 1762 was accomplished through the sale of lottery tickets. So, too, were construction projects for many colleges, including Harvard, Yale, Princeton, Dartmouth, Brown, and William and Mary. Colonial churches were not universally opposed to lotteries, as they also used ticket sales to build structures. Only the early Puritans and the Quakers voiced opposition.
Generally, governments did not use lotteries except for specific building projects. They did, however, institute laws to license as well as govern operations of lotteries; many lotteries were outside of government supervision. Most uses of lotteries had a noble or charitable purpose. Several entities, first as colonies and then as states used lotteries for the support of military activities during both the French and Indian Wars of the 1750s and the Revolutionary War two decades later. The Continental Congress authorized four lotteries in support of George Washington’s troops.
As the new nation began and a new century opened, lotteries remained very popular. Thomas Jefferson, who had earlier (in 1810) indicated that he would never participate in a lottery “however laudable or desirable its object may be”, changed his outlook in 1826, as he was financially short and desperately needed money to manage his estate. He asked the Virginia legislature to allow him to operate a lottery. In his later years he had mellowed on the subject of lotteries, as he described the lottery as a “painless tax, paid only by the willing”.
Lotteries proliferated in the early decades of the nineteenth century. In 1832 there were 420 drawings in the United States. The price of all the tickets combined constituted 3 percent of the national income and exceeded by several times the federal government budget. Soon the lottery was on a downhill slide, however, as the reform movement led by Pres. Andrew Jackson coalesced opposition to the drawings. Loose regulations and controls had permitted many scandals to surround the games. In one case a bogus lottery sold $400,000 worth of tickets but awarded no prizes. A Maine lottery director was discovered to have personally kept $10 million as expenses for a lottery that sold $16 million of tickets. In 1833 states started passing laws abolishing lotteries. First, Pennsylvania, Massachusetts, and New York prohibited the games, then all other states followed suit. As new states wrote their constitutions, the prohibitions were locked into basic laws. By the start of the Civil War only the border states of Delaware, Missouri, and Kentucky allowed lotteries. At the end of the war there were no lotteries.
The Civil War brought devastation to the American South, and several states looked toward lotteries for help. Most of the attempts to raise money with this kind of gambling were short-lived, however. Only the notorious Louisiana Lottery persisted into the 1890s. The Louisiana Lottery was conducted by private parties under a license from the state. Considerable corruption and bribery generated by the operation led the citizens of the state to ban the lottery in a public referendum. Legal lotteries ceased to exist in the United States until New Hampshire authorized a state-run sweepstakes in 1963.
Although legal lotteries remained dormant for nearly seven decades, illegal operations flourished in many parts of the country. In the nineteenth century, side lotteries had developed, as private syndicates, for a few pennies, would allow a person to “insure” that a number would not be selected. This game became known as policy, and was the forerunner of the numbers game. By the early decades of the twentieth century, the numbers game was well entrenched as an organized crime enterprise.
Lotteries returned to the legal scene with the passage of the New Hampshire Sweepstakes Law in 1963. Ticket sales began days after local communities approved their sale. Each cost three dollars, and buyers registered their names and addresses. The new lottery was based upon results of a horse race. First, forty-eight winning tickets were picked and each assigned to a horse in a special race. Depending on how the horse ran, the winners received from $200 to $100,000. The results were not an overwhelming success, but they generated substantial interest in the lottery idea. In 1967 New York State instituted a state-run lottery with monthly drawings. Tickets were purchased at banks where the buyers registered their names as in New Hampshire. In 1969 New Jersey followed. New Jersey was the first state to achieve desired levels of sales, as they used a weekly game and attracted customers with mass-marketing techniques. New Jersey also appealed to customers by selling tickets for fifty cents each, and players did not have to declare their names. New Jersey also utilized computers to track sales.
New Hampshire, New York, and New Jersey were not the first North American or Caribbean jurisdictions to have lotteries in the twentieth century. Mexico had established a game in the 1770s while it was still governed from Madrid, and the game persisted as the country gained its independence. Puerto Rico started its lottery in 1932. Canada, however, was influenced by the activity in the United States, as the national Parliament approved lottery schemes under provincial control in 1969. The first provincial lotteries appeared in Quebec in 1970. The spread of lotteries was quite rapid after the 1970s. All Canadian provinces as well as the Yukon Territory and Northwest Territories instituted games, as did most of the states. By the end of the century lotteries were in thirty-seven states plus the District of Columbia. Politically, the lotteries have commanded public favor, as many states adopted lotteries through popular referenda votes that amended state constitutions. Of all the states only two, North Dakota and Alabama, have ever rejected lottery propositions.
Lottery revenues constitute over one-third of all the gambling revenues in North America. State and provincial governments have come to rely on the revenue, although in most cases it constitutes 3 percent or less of the budgets of the jurisdiction. The revenues fluctuate from year to year, but over the past several decades they have provided a constant steady flow of money to public treasuries. The certainty of that steady flow is dependent upon governments’ adjusting to changing market desires of players and to advertising efforts. Game formats have changed considerably since New Hampshire first used its horse-race sweepstakes drawings. When one state offered an innovation – as New Jersey did in 1969 – other lottery states and provinces often followed with imitations. In 1974 Massachusetts began an instant lottery game using a scratch-off ticket that is preprogrammed to be a winner or loser. In 1975 New Jersey started a numbers game with the specific goal of competing with (and hopefully destroying) the prevalent illegal numbers game. New Jersey also installed an online system for tracking numbers at the same time.
Massachusetts tried a lotto game temporarily in 1977; then Ontario instituted the first permanent lotto game in 1978. Players choose six numbers from one to forty, and if no player has all six winning numbers, part of the money played is carried over into a future drawing with new sales of fresh tickets and a new drawing of winning numbers. Massachusetts allowed telephone accounts for lottery sales in 1980. South Dakota introduced the video lottery in 1989 with state-owned gambling machines that operate not unlike slot machines – albeit winning players receive tickets they must redeem for cash. The state of Oregon introduced its sports lottery also in 1989. Players pick four teams on a parlay card and if all the teams win, they receive a prize awarded on a pari-mutuel basis. In the 1970s Delaware had tried a sports lottery based upon individual National Football League games, but dropped the experiment after it suffered significant financial losses. Sports lotteries did not spread to other states, as Congress passed a law banning sports betting in all but Nevada, Oregon, Delaware, and Montana. Canadian provinces have sports lotteries.
With the beginnings of lotto games, lottery operations all went online; all the gaming sales outlets in the jurisdiction were linked together with a computer network. The next stage of lottery gaming could consist of games linked to individual home computers. Several European jurisdictions and Australian states offer these games. The Coeur d’Alene Indian tribe of Idaho had such a game for a brief time. Political opposition to Internet gambling, as well as attempts to enforce existing laws against transmitting bets over state lines, have precluded lotteries from venturing more into Internet gambling.
Several small states have banded together in order to offer bigger prizes and thereby compete with the bigger states. The first multistate lottery began in 1985 and involved New Hampshire, Maine, and Vermont. This was but a precursor of the Powerball game that started in the mid-1990s with the participation of twenty-one state lotteries. Another latter-day innovation for lotteries has been the use of instant ticket vending machines. It is estimated that there are 30,000 of the machines in operation in thirty states today.