North American Association of State and Provincial Lotteries Where the Money Goes

Frequently Asked Questions

Lottery Sales

How many lotteries are there?
In North America every Canadian province, 43 U.S. states, the District of Columbia, Mexico, Puerto Rico, and the U.S. Virgin Islands all offer government-operated lotteries. Elsewhere in the world government-operated lotteries exist in at least 100 countries on every inhabited continent. In some cases they are operated by national governments, in other cases by state or provincial governments, and in still others by cities.

What types of games do they offer?
Most offer instant or scratch-off tickets. Many offer lotto and/or numbers games. Some also offer keno or video lottery terminals. Outside of the United States many offer various types of sports betting. Raffles or passive games are less common. A few government lotteries, including those in Atlantic Canada, Delaware, Maryland, New York, Ohio, Oregon, Rhode Island, South Dakota, West Virginia, British Columbia, Manitoba, Ontario and Quebec, also operate video lottery terminals, casinos and/or racinos in their jurisdictions.

How much do North American lotteries sell?
During fiscal year 2016 (which for most jurisdictions ended June 30) U.S. lottery sales totaled $80.5 billion (USD). Canadian sales reached $10.3 billion (CAD).

What jurisdictions sold the most?
New York led the U.S. (and North America) with fiscal 2016 sales of $9.69 billion (USD), followed by California with sales of $6.27 billion (USD). The Canadian leaders were Ontario with fiscal 2015 sales of $3.75 billion (CAD) and Quebec with sales of $2.73 billion (CAD)

Lottery Revenues

What do lottery revenues benefit?
Lottery proceeds benefit different programs in different jurisdictions. In many cases lottery profits are combined with tax and other revenues in a government's general fund. In other cases lottery proceeds are dedicated to a wide range of causes, including education, economic development, the environment, programs for senior citizens and veterans, health care, sports facilities, capital construction projects, cultural activities, tax relief, and others.

Who decides where the money goes?
The recipients of lottery proceeds are specified in a jurisdiction’s lottery legislation, the lottery’s rules and regulations, and the state or provincial constitutions.

But isn't it true that lotteries haven't benefited education like they were supposed to do?
First, not every jurisdiction dedicates lottery proceeds to education; in fact, less than half do. In many places where there is a dedication to education, state education spending has risen but other parts of the budget have risen faster. Education is therefore a smaller proportion of the budget than it was before the start of the lottery. Skyrocketing medical care costs and the demand for new prisons have placed a tremendous strain on all government budgets. Schools have benefited from lottery funds, but this contribution is often masked by the other demands placed on state budgets.

It is also true that some non-lottery states spend a higher percentage of their budget on education than do lottery states, but in most cases the lottery states spend more per pupil. Individuals making this argument fail to recognize that the funding needs of all states are not equal. High-growth and more populous states, in particular, usually have greater needs in areas such as criminal justice and health care than do smaller, more rural states, and it should come as no surprise that their education percentage is smaller. The more populous states are also the states most likely to have lotteries.

How much money do lotteries raise?
Since the New Hampshire lottery was founded in 1964, lotteries have raised more than $430 billion (USD) for government programs in the United States, and more than $100 billion (CAD) in Canada. In fiscal year 2016 Canadian lotteries transferred $3.3 billion (CAD) to their beneficiaries, while U.S. lotteries turned over $22.5 billion (USD) to theirs.

Purchasing Lottery Tickets

Where are lottery tickets sold?
Lottery tickets are sold at more than 210,000 locations throughout North America. Most of these locations are conventional retail outlets such as convenience stores, gas stations, and supermarkets.

How is it decided who gets to sell tickets?
State and provincial laws set minimum standards to sell lottery tickets based on financial soundness and integrity of the retail agent. Generally, any retailer meeting these standards will be eligible to apply to their jurisdiction’s lottery to obtain the required licensing needed to sell lottery tickets.

How much do these retail outlets make for selling lottery products?
Retailers are paid a commission on every ticket they sell. These commissions vary from jurisdiction to jurisdiction, but typically range from 5 percent to 8 percent depending on the specific product being sold. Retailers may also be compensated for cashing winning tickets, awarded bonuses when they sell a ticket which wins a major prize, or rewarded for exceeding sales goals. Retailers typically pay a license fee and in some cases other costs relating to the sale of lottery tickets. These costs also vary from jurisdiction to jurisdiction.

I don't live in a state with a lottery. How can I buy a ticket?
You must travel to a state or province with a lottery and buy the ticket there from a licensed lottery retailer. Lottery tickets cannot legally be sold by mail, telephone, or in any other type of interstate commerce.

Can lottery employees play the lottery?
Usually, no, though laws do vary from place to place. In most cases the employee's immediate family and employees of lottery suppliers are also not allowed to play. In practice, there is no way that employees could alter the outcome of a game in their favor, but lottery officials generally believe that public confidence would be damaged should an employee win a large prize.

Lottery Prizes

What was the biggest prize in history?
On January 13, 2016, the Powerball lottery made history with the largest jackpot ever: $1.58 billion. The jackpot was split three ways, by winning tickets in California, Florida and Tennessee.

What will happen if I win a big prize?
Winners of large prizes must bring the winning ticket to lottery headquarters -- the amount at which you must show up in person varies from jurisdiction to jurisdiction. The ticket will be examined by lottery security staff for authentication. The lottery usually gives some advice on seeking financial and legal guidance along with some practical advice like getting an unlisted phone number. All but a very few states and provinces have laws that require the lottery to make public the name and city of every winner (to assure the public that there are real winners). The lottery may require the winner to participate in a press conference. Most winners take that option. It really is a good idea to get it over with since the press is likely to pursue your story until they get some questions answered. Questions are usually along the lines of "will you quit your job?" or "what will you do with the money?" or "how did you tell your family you won?" After a few weeks the excitement usually dies down and you can go about your life.

Can winners remain anonymous?
In most jurisdictions, no. State and provincial lawmakers want the public to know that the lottery is honestly run and so require that at a minimum the name of the winner and their city of residence be made public. This way the public can be reassured that the prize really was paid out to a real person.

Some large lottery prizes pay out over a period of several years. What if the holder of this type of prize dies before collecting it all?
In this case the prize is considered to be part of the estate and is passed along to the winner's heirs. Contrary to popular belief, the prize does not revert to the government. The only exceptions are "win for life" games where a prize is guaranteed for the rest of the winner's life. In this case the payments stop with the winner's death.

How long do I have to claim my prize?
The time to claim a prize varies from place to place, but typically is between six months and one year.

What happens to prizes that aren't claimed?
The disposition of unclaimed prizes varies from lottery to lottery and is governed by the laws of that state or province. In some cases all unclaimed prizes reenter the prize pool and increase the payout on future games. In other cases the money goes to the government to benefit the causes the lottery supports.

Who Plays Lotteries?

Who buys lottery tickets?
People from all walks of life and all income levels like to play lottery games. Across the United States, players bought more than $80 billion in tickets in 2016. Clearly, the industry didn’t achieve sales of that magnitude by focusing on low-income players. Lotteries market games to society as a whole, just like any other business selling a product in a competitive marketplace. The result is that players come from across the income spectrum. A recent Virginia study found 55 percent of those who play lottery games at least once month have incomes of $55,000 or more. A third of those who play at least once a month have incomes of $85,000 or more. In Michigan, 43 percent of players have incomes of $50,000 or more and 75 percent have incomes of $25,000 or more. A national study (by Vision Critical) found 44 percent of lottery players have incomes of $55,000 or more and 77 percent have incomes of $25,000 or more.

Some lottery critics that want to “prove” otherwise often rely on “zip code studies.” That’s when you take a certain zip code, look at total lottery sales within that area, and then assume that everyone in it has the same income and refuses to play the lottery anywhere else. Of course, the reality is people don’t always buy their lottery tickets in the neighborhoods where they live. They purchase them on their way to or from work, while shopping or running other errands, or even at the airport. Zip code studies fail to take that into account. It’s like saying that gasoline purchases are made mostly by poor people, because there are few gas stations in wealthy neighborhoods.

But not all of these people play the same amount. Don't most lottery sales come from a relatively small number of people?
As with any product or service, some people are more enthusiastic consumers than others. Business schools teach marketing students the "pareto principle:" the idea that no matter what the product, 80 percent of the sales will come from 20 percent of the customers. Lotteries are no different. A Minnesota study, for example, found that 20 percent of the lottery players account for 71 percent of lottery income. In Arizona, 24 percent of lottery players accounted for 70 percent of lottery spending, and in Pennsylvania 29 percent of the players accounted for 79 percent of the spending on the lottery.

What about the heaviest lottery players? Aren't they poor, undereducated, and desperate?
Again, no. Numerous studies conducted in a wide range of jurisdictions show that frequent or "heavy" lottery players closely resemble the overall population of that state or province. They are no more likely to be poor or have little formal education than a citizen selected at random.

Don't poor people spend a higher percentage of their incomes on lottery tickets than those of greater means?
Poor people spend a larger proportion of their income than wealthy people on any item having a fixed price and general appeal. Poor people pay proportionately more for food, medicine, clothing, utilities, insurance, and housing, as well as for payroll and sales taxes. People who are well-off, on the other hand, spend a higher percentage of their income on things that the poor cannot afford, such as overseas vacations or season tickets to cultural or sporting events. The rich also invest and gamble in stock and commodity markets -- also activities the poor cannot afford.

Lottery opponents have pointed out, though, that unlike spending on, say, a movie ticket, the lottery ticket is purchased from the government and is therefore a regressive tax. But the lottery is not a tax. Webster defines a tax as "a compulsory payment ... for the support of government." No one is coerced to play the lottery. The purchase of a lottery ticket is completely voluntary - and a lot more fun than filling out Form 1040.

Ultimately, though, the important question isn't the percentage of income spent. It's whether the less affluent are spending an unduly large portion of their income on lottery tickets. This has undoubtedly happened in some instances just as it undoubtedly happened with junk food, athletic shoes, and other consumer items. However, there is no evidence suggesting that it is anything approaching the norm. The overwhelming majority of poor people, along with the overwhelming majority of upper-income people, play with restraint and moderation.

But shouldn't the government try to keep those who can least afford it from spending their money on the lottery?
This question implies that economically disadvantaged people are somehow less capable of making a decision on how to spend a dollar than those of greater means or that they are not entitled to the same opportunities for entertainment and recreation than the rest of us. The poor are allowed to vote, get married, and sign contracts. Society in the U.S. and Canada does not usurp rights and privileges based on socioeconomic status. The poor have to budget and watch their expenditures much more carefully than the rich. Economic status is not a measure of intelligence.

 

Lotteries and Compulsive Gambling

Do lotteries contribute to compulsive gambling?
To begin with, there’s little evidence linking lotteries and problem gambling. Problem gambling help lines throughout North America report very few callers who cite lotteries as the source of their problem. A University of Minnesota study of 944 gamblers in treatment found that less than one percent cited lottery as their preferred game. The National Survey on Gambling Behavior conducted by the University of Chicago’s National Opinion Research Center concluded that “it does not appear that the availability of a lottery has an impact on (problem gambling) prevalence rates.” A study of 2,274 U.S. adolescents found that “The forms of gambling that were most associated with gambling problems were card games, casino gambling, ‘other’ gambling on routine activities, and betting on games of skill such as basketball, pool, or golf.”

Moreover, there is also little evidence that compulsive gambling from any source is growing. A 2014 study from the Research Institute on Addictions at the State University of New York at Buffalo compared national surveys taken in 1999 and 2013 and concluded that “rates of pathological and problem gambling remained stable ... This occurred even though there was a general expansion of legal gambling and liberalization of gambling laws in the US during this time.” And a study prepared for the Ontario Ministry of Health and long Term Care reviewed 202 problem gambling prevalence surveys from around the world concluded “There has been a general worldwide downward trend in both gambling and problem gambling rates beginning in the late 1990s for North America ...”

Lottery Regulation

Who regulates lotteries?
Lotteries are regulated by their state or provincial governments. Federal regulation in the U.S. is limited to interstate distribution of tickets and interstate advertising.

Can state governments be trusted to regulate lotteries when they benefit from the lottery proceeds?
State regulatory proceedings are much more open and accessible to the public than the workings of federal regulatory agencies. All lottery board meetings are public, as are all legislative hearings. Lottery files are public records, subject at any time to media scrutiny. Lottery opponents in a legislature can examine the smallest lottery details and vote on lottery business operations. (In what other business would those opposed to the business' existence be permitted a vote on business operations?) And if the public does not approve of the way a lottery is run, they have recourse at the ballot box and the ultimate sanction of refusing to buy tickets. Those who claim that lotteries are not regulated are really complaining that the regulators have made decisions they don't agree with.

If the states cannot be trusted to regulate lotteries because they make a relatively small amount of money on them (an average of 1/2 of 1 percent of the state budget) it follows that they should not be allowed to make their own tax policy as well.

Lottery Odds

Is it true that the odds of winning the lottery are worse than being struck by lightning?
While lightning may strike somewhere in the United States 25 million times a year, it does not strike citizens in the United States as often as the luck of winning a Powerball or Mega Millions jackpot does. For example, over a recent three-year period, there were 82 winning tickets that shared, or won outright, a Powerball or Mega Millions jackpot. Beyond jackpots, more than 1,300 tickets won at least $1,000,000 on either Powerball or Mega Millions from 2013 to 2015. For the three similar reporting years, the National Oceanic and Atmospheric Administration (NOAA) reports 67 lightning fatalities in the United States where these games are played. In truth, you have a better chance of striking it rich than you do of dying from a lightning strike in the United States. Of course there is one fact we do know: players have a zero chance of winning the jackpot if they never purchase a ticket.

I bought six tickets for a game where the odds were one in four, and none of them were winners. Doesn't this show that the prizes aren't awarded randomly?
No. Consider tossing a coin. It is certainly possible for a coin to come up heads four, five, or more times in a row, even though the odds are one in two. Part of randomness is the concept that every ticket has the identical chance of winning and that the result of one ticket has no impact on the next. Suppose "one in four" meant that out of every four tickets there was exactly one winner. Suppose three tickets in a row lost. You now know that the next one is a winner. This is not random. If you were a store clerk and saw three people in a row buy non-winning tickets, would you sell the next one or keep it for yourself? This is why true randomness is necessary for security.

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