Definition
In a generic sense, the word lottery can cover almost any form of gambling. The word has been applied to any game that offers prizes on the basis of an element of luck or chance in exchange for consideration, that is, something of value. In Canada, the term lottery scheme has come to include all casino games. The term as used in Wisconsin law similarly encompassed casino games, and as a result Native Americans were permitted to have casinos because the state had a lottery.
Thomas Clark’s definition in The Dictionary of Gambling and Gaming is typical (Clark 1987). On the one hand, he views a lottery as “a scheme for raising money by selling lots or chances, to share in the distribution of prizes, now usually money, through numbered tickets selected as winners….” On the other hand, he then adds, “in cards, a game in which prizes are obtained by the holders of certain cards”.
The Variety of Games
Passive Games
The first lottery games set up in the 1960s and 1970 were what are called passive games, in which the buyer is given a ticket with a number preprinted on it. At a later date – perhaps as much as a week (but originally even months) – the lottery organization selects the winning number in some random manner. Usually the organization will use a Ping-Pong ball machine that is mechanical and can be easily observed by viewers. Computers might do a better job in the selection process, but ticket buyers seem to like to see the process of numbers being selected. The ordinary games involved numbers with three, four, five, six, or more digits. Passive games have been operated on monthly, weekly, biweekly, or even daily schedules. These games are described as passive because the player’s role is limited to buying a ticket; the player does not select the number on the ticket. Also, the player must wait for a drawing; the player cannot affect the timing of the drawing.
Instant Games
In the case of instant tickets, a finite number of tickets are sold. The state contracts to have all the tickets printed. A number or symbol indicates that the player wins or loses. The symbol is covered by a substance that can be rubbed off by the player; however, the substance guarantees that the symbol cannot be viewed in any way before it is rubbed off. If all of a batch are sold, the lottery is like a bingo organization, as it merely managers the players’ money, shifting it from losers to winners and taking out a fee. The lottery organization is the winner. Unlike passive games, in instant games the player determines the speed of the game; the player activates the game at any time by rubbing off the covering substance.
Numbers Games
In numbers games, players are permitted to actively select their own numbers, which are then matched against numbers selected by the lottery at some later time. Many numbers games are played on a daily cycle. Usually the lottery will have a three-digit number game and a four-digit number game. A pick-three game allows the player to pick three digits, which may be bet as a single three-digit number or in other combination of ways. A machine may also pick the number or digits for the player. However the number is picked and bet, the player is guaranteed a fixed prize if the number is a winning number. For instance, if it is bet as a single number such as 234, and number 234 is selected by a randomizer as the winning number, the player receives a fixed prize of $500 for a one-dollar play. For a pick-four game the prize typically would be $5,000 for a winning number bet “straight-up”.
In these games, there can be no doubt but that the lottery organization is a player betting against the ticket purchaser. These are in effect house-banked games. Some states have sought to improve their odds (even though their payoffs give them a theoretical 50 percent edge over the player) by limiting play on certain numbers or by seeking to adjust the prize according to how many winners there are for the number picked.
Lotto Games
There is a variety of lotto games. In Texas there is a pick-six game. The lotto player selects six numbers or lets a computer pick six numbers from a field of numbers one through fifty. A ticket costs one dollar. A random generator picks six winning numbers. A fourth prize guarantees the ticket holder $3 for having three numbers. A pool amount for third prize is divided among players who have four numbers selected. A second-place pool is divided among players who have five numbers, and a grand prize pool is reserved for players with all six winning numbers. If no player has six winning numbers, the grand prize pool is placed into the grand prize pool for a subsequent game played at a later time. The lotto games gain great attention owing to superprizes that often exceed $100 million – the biggest prize was over twice that much. On 26 April 1989 the Pennsylvania lottery gave a prize in excess of $100 million for the first time (NBC’s Today Show, 26 April 1989). In the early 1990s a multistate lottery awarded a prize of about $250 million.
Video Lottery Terminals
Video lottery terminals are played very much like slot machines. They are authorized to be run by lotteries in several states, including South Dakota, Oregon, and Montana, in bars and taverns. In Louisiana the machines also are permitted but are operated by the state police. Racetracks operate machines under government control in Iowa, West Virginia, New Mexico, Delaware, Louisiana, and Rhode Island. Seven of the Canadian provinces have lottery-controlled machines in bars. They are also at racetracks in Alberta, Saskatchewan, Manitoba, and Ontario. Where the machines are operating in large numbers, they usually dwarf other revenues of the lottery.
Lottery Revenues
An overview of lotteries shows that in 1998 traditional (nonlottery machine) ticket sales amounted to $33.9 billion. Of this amount, $18.8 billion (55.4 percent) was returned to players as prizes, and $15.1 billion (44.6 %) was winnings for the lottery. Each resident in the lottery states spent an average of $149.52 on tickets. This represented 0.6 percent of the personal income in the states. Governments retained $11.4 billion (33.7 %) of the money spent on tickets after all expenses were paid. A study of lottery efficiency by International Gaming and Wagering Business magazine showed that overall it cost $0.3439 for each dollar raised for government programs by the lotteries. The efficiency of raising money ranged from New Jersey, where it cost $0.2020 cents, to South Dakota and Montana, where it cost over one dollar in expenses to raise the dollar for government programs via lotteries.
Criticisms
Criticisms of lotteries come from several sources. With information such as that in the preceding section, many have suggested that lotteries are an inefficient way to raise money for government. Lotteries are also open to the charge of being regressive taxes, albeit “voluntary” ones, as Thomas Jefferson suggested. The National Gambling Impact Study Commission reserved many of its harshest criticisms for state lotteries. It should be added that lottery organizations were not represented in the membership of the commission. The commission was strong in protesting against lottery advertising both for being misleading and for encouraging people to participate in irresponsible gambling. The commission also concluded that lotteries did not produce good jobs. Special criticism was reserved for convenience gambling involving lotteries, as the commission recommended that instant tickets be banned and that machine gaming outside of casinos – such as video lottery terminals at racetracks – be abolished.
Some also criticize lotteries as inappropriate enterprises that redistribute income by taking money from the poor and making millionaires, suggesting that some of these new millionaires are unprepared for their wealth and do not use it responsibly. This criticism is dealt with at length in H. Roy Kaplan’s Lottery Winners (1978), discussed in the Annotated Bibliography.