Raising Public Funds Through the Lottery

The lottery is a system in which prizes are allocated by a process that depends entirely on chance. It is therefore not reasonable to prohibit a significant proportion of people who wish to participate in such an arrangement from doing so, provided that they are willing to accept the risk that they may lose some or all of their money.

While the casting of lots to decide fates and distribute goods has a long record in human history, lotteries as a vehicle for raising public funds are more recent. They were introduced in the United States during the 1960s and were rapidly embraced by states with large Catholic populations that were generally tolerant of gambling activities.

In general, lotteries are state-sponsored enterprises whose profits are devoted solely to government programs. The United States has forty-eight state lotteries, all of which are operated by governments that have the exclusive right to operate them and that do not allow private commercial lotteries. State governments are permitted to use the proceeds of the lotteries for any purpose, and most do so, including public education, transportation, and infrastructure development.

The majority of state lotteries in the United States are traditional raffles, with participants purchasing tickets for a drawing at a future date, typically weeks or months away. In the 1970s, however, a number of states developed new games that allowed participants to win cash prizes immediately. These games, which are known as scratch-off tickets, have lower prize amounts but offer better odds than conventional lottery drawings, ranging from one in several hundred thousand to one in four million. During the early 2000s, the popularity of these new games increased dramatically.

By 2004, more than 186,000 retailers sold scratch-off tickets, the vast majority of which are convenience stores. Other outlets include service stations, nonprofit organizations (including churches and fraternal groups), restaurants and bars, and bowling alleys. Some states restrict the number of retailers that can sell tickets, but others do not. In either case, retailers work closely with lottery personnel to promote the sales of their products. During 2001, for example, the New Jersey lottery launched an Internet site just for its lottery retailers, where they can read about game promotions and ask questions of lottery officials online.

Lottery advertising focuses primarily on telling people how much fun it is to play, which is consistent with the message that lottery proceeds are for entertainment purposes only. Many surveys have found that people who play the lottery regularly spend a substantial portion of their incomes on tickets, and those who play the most often are low-income individuals.

Although the lottery has been shown to raise significant amounts of money, it is not as cost effective as other revenue sources. Nevertheless, some consider it an essential component of the public welfare system because it allows the public to fund government services without incurring the social costs of sin taxes such as those on alcohol and tobacco.