The Ugly Underbelly of Lottery Laws


A lottery is an arrangement in which prizes are allocated by chance. The casting of lots has a long record in human history, including dozens of examples in the Bible. Lotteries for material gain are more recent; the first recorded public lottery was held in the 15th century to raise funds for repairs in Rome, and the first to distribute cash prizes was held in Bruges in 1466.

In modern times, a lottery is usually run to allocate something that is in high demand but is limited in supply. Typical examples include units in a subsidized housing block or kindergarten placements at a reputable public school. The money for these awards is typically collected from paying participants who enter a drawing in which numbers are randomly spit out and winners selected.

The principal argument used to promote state lottery laws is that the proceeds are a “painless” source of revenue, and that people who play will voluntarily spend their money for the benefit of the general public. This argument is especially appealing when states are under financial stress and facing cuts to existing services. But the evidence shows that this dynamic is not as strong as its proponents suggest, and in fact it can backfire.

When state governments adopt a lottery, they are actually creating a dependency on revenues that can be hard to maintain when the economy slows down. As the state’s revenue stream shrinks, so does its capacity to spend on the items that it has been promising to fund.

As a result, many lotteries have moved away from the message that they will help people out of financial trouble and toward an emphasis on how much fun it is to play. This has helped to obscure the regressivity of lottery funding and its effects on the poor.

Another problem is that, because of the way in which lottery advertising is geared to attract consumers, it promotes irrational gambling behavior and falsely implies that winning is possible. Many people I have talked to who have been playing the lottery for years and spending $50 or $100 a week tell me that they know their odds are bad but they keep playing because there is still this sliver of hope that they will win, even though they have no other real chance of getting ahead in life.

The exploitation of this psychological vulnerability has helped lottery profits grow, but it also has produced an ugly underbelly. Many states have become heavily dependent on the revenue from their lotteries and have developed large, specific constituencies of convenience store owners (who profit from a lottery’s presence); lottery suppliers (who donate heavy sums to state political campaigns); teachers who receive a share of the revenues earmarked for them; and state legislators (who come to rely on the extra income). In short, few, if any, state legislatures have a coherent gambling policy or a lottery policy. This is the classic case of a piecemeal approach to policy making, in which the overall effect of a given action is not taken into consideration.