The Ugly Underbelly of Lotteries

The casting of lots for material gains has a long record in human history (it even appears in the Bible). But modern lottery play is not so much about chance as it is about money. The big prizes lure people in, but the odds against winning are incredibly steep. This is the ugly underbelly of lotteries.

Lottery commissions have tried to tamp down the message by making it more sophisticated, but that only obscures how regressive and addictive their products are. They have also moved away from promoting the specific benefits of lottery funds to state governments, and instead now tout them as “painless” tax revenue that is used by voters voluntarily and for public benefit. That message is coded to appeal to the idea that lottery proceeds are a low-risk, high-reward investment in a society of increasing inequality and shrinking social mobility.

As a result, the growth of lottery revenue has been fueled by the expansion of new games like keno and video poker, as well as more aggressive marketing. In addition, lotteries have been able to boost sales by raising or lowering the prize amounts and increasing the number of balls in the hopper. But the underlying issue remains: Lotteries attract billions in dollars from people who might otherwise be saving for retirement or their children’s college tuition, or investing in mutual funds, stocks, or real estate.

Moreover, lottery play is deeply regressive: Lottery players are more likely to be white and male and less educated, and they are more likely to spend more of their income on tickets. These facts, combined with the fact that the average jackpot is less than half of a million dollars, make it clear that the lottery represents a significant form of gambling for those at the bottom of the economic ladder.

Lotteries are a powerful tool for states in need of additional revenue, but they must strike a balance between the size of the jackpot and the amount of money available to pay the winning ticket. If the jackpot is too large, a winner will be found quickly and lottery revenues will decline; but if the jackpots are too small, they can’t generate enough excitement to increase player interest. Regardless, it is important for state policymakers to understand the dynamics of lotteries and to consider alternative ways to raise money for public services. That might include rethinking the current lottery model and exploring options such as tax-exempt bonds, a popular strategy in other countries. Khristopher J. Brooks is a reporter for CBS MoneyWatch. He has previously worked for the Omaha World-Herald, Newsday and the Florida Times-Union. He focuses his reporting on the U.S. housing market, the business of sports and bankruptcy. He has a bachelor’s degree in journalism from the University of Nebraska-Lincoln. He lives in Washington, D.C., with his wife and two young sons. He can be reached at [email protected].