The Hidden Problems of the Lottery Industry


When you purchase a lottery ticket, you’re essentially paying to have your chance of winning a prize drawn at random. The more numbers you match, the bigger the prize. While winning the lottery may seem like a long shot, people still play in large numbers. There is, of course, the inextricable human urge to gamble. Lotteries are able to tap into this desire by marketing their games with huge prizes and billboards. But there’s more to a lottery than just a game of chance and hope.

State governments profit enormously from lotteries, as their coffers swell with ticket sales and winners. But that money comes from somewhere, and studies have shown that it’s disproportionately taken from low-income people, minorities, and those struggling with gambling addiction. That’s a major problem, and it’s one that the lottery industry isn’t really talking about.

In the immediate post-World War II period, a growing number of states began running lotteries to raise funds for various social safety net services. It was a way for these states to expand their programs without raising taxes on the middle class or working class, and it worked: in some cases, lottery revenues made up more than half of state government’s revenue.

But the arrangement was flawed from the beginning. The vast majority of the proceeds from lotteries was going to convenience store operators (who then used that money to make campaign contributions), state lottery suppliers (who also contributed heavily to state political campaigns), teachers (in states where lottery revenues were earmarked for education), and state legislators.

In addition, lotteries were rife with corruption. In some cases, lottery commissions were run by organized crime families, and the resulting graft was often severe. Lottery commissions have tried to reduce this scandalous behavior by changing their structure and regulating the business more tightly. But in many states, lottery commissions are still controlled by large and powerful business interests, and the old problems persist.

Despite all the warnings, many people continue to play the lottery. They’re attracted by the idea of a big jackpot and the promise that their lives would instantly change for the better. And for some, that might be true. But many others end up blowing their winnings and living a life of misery, and it’s important to know how to avoid that outcome. The key is to keep your emotions in check and follow sound financial planning principles, such as assembling a “financial triad” to help you plan for the future. For example, a certified financial planner told Business Insider that lottery winners who assemble these groups are far less likely to go broke than those who don’t. This article was originally published on August 27, 2017 and has since been updated.

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