State Lotteries

In 1994, Nicolas Cage’s character gave a waitress (played by Bridget Fonda)
half of a lottery ticket as a diner bill tip in the movie “It Could Happen to
You” and both of their lives are then changed in more ways than one.

In 2005, America was introduced to Jason Lee’s Earl Hickey whose $100,000
winning scratch-off ticket started a chain of events prompting him to change his
Karma in the popular TV show “My Name is Earl.”

These are fictional, of course, but every time you hear about a new lottery
winner, it’s like a fairytale coming true because life really can change in just
six numbers.

Nearly 100 countries around the world have some National Lottery program. In
the US, it’s run on the state-level in 44 out of 50 states plus the District of
Columbia, Puerto Rico, and the US Virgin Islands.

The US Lottery Since the 17th Century

Our modern day lottery started to take shape in 1963, but it has 300 years of
history in the relatively new country.

Back in the 17th century, the

first public-private lottery was held to support the new colony, helping to
fund the infrastructure including schools and bridges. In the 1820’s, a national
lottery competed with state lotteries with funds that were ear marked to help
establish the District of Columbia, but it also prompted Cohens v. Virginia, one
of the first battles over state’s rights.

Without going into all of the twists and turns on the road to the current
lottery system, suffice it to say that the US government outlawed lotteries in
1878. That decision was appealed in 1895, but in 1913, the government turned to
the income tax system as an alternative to a national lottery system.

The 60s prompted the re-emergence of an active state lottery program to
increase the individual tax bases with the primary intent of using the profits
for education. In the 70’s, Maryland set a new trend by producing the first scratch off
tickets, giving players an instant win possibility and the state an increase in
participation.

Usher in the mid-80s and the first modern day joint state program in Maine,
New Hampshire, and Vermont. In 1988, the Multi State Lottery Association (MUSL)
included Iowa, Kansas, Missouri, Oregon, Rhode Island, West Virginia, and DC as
charter members. The MUSL eventually transformed into the Powerball network that
we know today and every US location that offers state lottery issues Powerball
tickets.

Mega Millions, the other big multi-state venture was initially called The Big
Game, and it’s also now in every location except Puerto Rico.

The Two Types of Lottery Tickets

Although each offers numerous variations in structure and payout
opportunities, the lottery boils down to two broad categories:

• The Draw
• The Instant Scratch-off

The drawing ticket is the original method and has been around for centuries.
It can best be compared to a keno card in a casino. The player has specific
numbers and needs to match those numbers to the ones selected in the random draw
to be a winner.

A typical state lottery game like Lotto will usually have six numbers that
need to be matched to get the top prize, but it gets a bit more complicated in a
higher odds, higher payout game like Power Ball. There are still six numbers on
the card, but they’re separated out into five numbers that need to be matched
and then a sixth that stands on its own and needs to be matched one on one.

Draw tickets usually start at daily drawings of just three to five numbers
but can be offered in many different formats. The biggest prizes are awarded
through the multi-state lottery system as opposed to instant wins.

The Instant Scratch-offs, although introduced in 1974, didn’t hit their
stride until the 1980s and now they’re everywhere with different buy-ins
starting at $1 and going up to $100 per ticket. They take on various themes, and
there can be multiple ways to win depending on the ticket.

Today’s tickets are much more interactive prompting players to take a few
minutes to play the game by matching up symbols or letters or playing a bingo
game on their ticket. Keeping players engaged has proven to keep them coming
back for more.

Although there hasn’t been a billion dollar scratch off prize (as yet),
scratch offs have been millionaire makers. A teen in Illinois received one of
the best birthday presents ever when she scratched off a

$4 million winning ticket in 2014. The top prize on that particular ticket
was $100 million, but we don’t think she was complaining.

The Lottery Can Pay Big

If you’ve played the lottery, you know that those small wins like two or
three dollars are entirely possible and very common. Depending on the
scratch-off ticket, your odds of winning can be as low as something like 1:3.

Even winning a smaller but substantial amount like $50,000 comes in at 1 in
913,000 so, don’t quit your day job based on a $2 ticket until you’re 100% sure
of the outcome.

Record-Setting Wins

The
biggest lottery win to date was issued through a US Powerball drawing in
2016 when 1.6 billion dollars was split between three winning tickets. One of
the winners opted to take their $528.8 million share as a lump sum payment of
$327.8 million. Not too bad for just one-third of the prize pool.

In 2013, an 84-year-old player from Florida claimed the one single prize of
$590.5 million from her lucky Powerball ticket.

Mega Millions came in close in 2016 providing one lucky Indiana winner with a
$540 million grand prize.

When you compare
lottery wins around the world, the United States claims the top ten spots in
the overall rankings. Europe’s largest jackpot in the EuroMillions lottery takes
number 11 its 183.5 million Euro prize claimed.

The State-Run Lotteries

Although Powerball and Mega Millions are multi-state ventures, the lottery in
the US is set up and run individually by each state.

Get Your Tickets

As long as you live in a state that offers the lottery, you have access to
tickets in most supermarkets, convenience stores, and gas stations. You can
purchase from the counter, or many retail locations now have an automated
machine that works like a regular vending machine. Put your cash in and make
your selection.

You have to figure that with our lives so much in the virtual realm that the
lottery would follow and it does… For the most part.

Georgia and Illinois offer an online purchase program right from their
primary lottery sites. In California, a paid service like Lotto Gopher will take care
of online purchases for players for $12 a month or $99 per year, but that
doesn’t include the tickets.

Some online casinos now offer lottery play based on the biggest programs
around the world, including the US, and there are also websites dedicated to
providing lottery tickets from the US and other countries like Australia,
Canada, Italy, the UK, and many others. The Lotter
is one of the online services, and they charge a service fee for each purchase
but do not receive a cut of any winnings. If you initiate a purchase, you get a
scanned copy of your ticket for verification.

Lump Sum or Annuity

You may have run through the scenario in your head before. If you won a
multi-million dollar lottery prize, what would you do? Would you take it all at
once or would you spread it out for several years guaranteeing a nice check
every year?

There are different schools of thought, and there isn’t a straightforward
answer to the question.

When you consider everything, it’s possible that you could end up with a
higher net payout by spreading out the payments over 30 years as an annuity.
However, it all depends on the tax situation remaining the same as it is today.
Major tax increases in the future will affect those subsequent annual issues.

When the

numbers were run based on a $400 million dollar win, taking a lump sum
payout at today’s current US tax rate, they resulted in an estimated payout of
$223.6 million dollars.

Take the same win and extend it out over 30 years and the result was an
estimated net payout (after taxes) of $242.9 million. However, that’s assuming
that nothing will change over 30 years and that’s a pretty big assumption. It
could go either way, and you could end up with an even better result, or the tax
situation could take a turn for the worse, and you could end up lower than the
lump sum settlement.

Some Interesting Facts

• 10% of all Powerball winners have been from the State of Indiana.
• The odds of winning both the Powerball and the Mega Millions’ top prizes are
  one in 75 quadrillion (that’s 15 zeros!).
• Odds of winning Mega Millions are 1 in 285 million. The odds of getting
  struck by lightning? 1 in 13,500.
• The North American Lottery Business is a $70 billion dollar a year business.

The Lottery takes a different shape in Stockholm Sweden with the “Speed
Camera Lottery.” The camera takes photos of all cars, both the speeders and
the ones obeying the limit. The law abiders are all entered into a drawing with
one license plate drawn at random. The owner of that car receives a percentage
of the speeding ticket pool from the drivers who were cited. In this case, the
player without the ticket is the lucky one!

Conclusion

It’s fun to dream about it and much more fun to realize it, but those big
lottery jackpots are few and far between. Don’t forget about all of the people
who are taking home $1,000, $10,000 or $50,000, though. Those secondary prizes
may not make you a millionaire, but they can be pretty darn exciting to claim.

Odds, Strategy, Payouts… Lottery Questions