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The Lottery

David Cowles

Mar 1, 2023

“The state lottery is just about the only financial vehicle that offers people of modest means a realistic opportunity to materially impact their economic circumstances.”

We all love to gamble, most of us anyway; but why? If we know the rules of the games, we know that we are unlikely to walk away a winner. Unless we have a ‘gambling problem’, most of us gamble for the fun of it. 

When we go to Vegas, we don’t expect to come home with life-altering riches – casino rules make that a virtual impossibility. If we’re smart, we expect to come home slightly poorer than when we left. We gamble because we enjoy the games themselves. Plus, it is an undeniable thrill to “beat the house”, even if only to a modest extent and for a short period of time. Bottom line: for most of us, gambling is not a financial planning strategy.

Or is it? 60 million Americans play state lotteries every year. In states that have lotteries (44) the average adult invests more than $300/year in numbers, scratch cards, and other proposition bets. While it can be fun at first to scratch a card looking for winning numbers (is this the modern version of the Gold Rush?), after a while it can get tiresome (as did panning for gold). Yet we still do it. Why?

Simple, we do it to get rich! “Whoa, I thought you just said that you couldn’t get rich gambling.” That’s right, I did say that, and it’s true…in casinos! Lotteries are a completely different kettle of fish. Here’s how they work:

In the better states/games, up to 75% of the proceeds go back to the players as ‘prizes’ while the state retains the other 25% to cover costs associated with the games (5%) and to fund public budget items (20%), like education, transportation, and healthcare.

In Massachusetts, my home state, the new $50 scratch card returns 82% of proceeds to the punters. Most lottery bets, of course, are losers; but a fair number return a modest prize to keep players from getting discouraged. A very few bets return prizes ranging from $1,000,000 up to $1,000,000,000.

The MA scratch game above has 19 prizes of $1,000,000 or more ($3,400,000 average). 25% of all tickets are winners. The minimum payout on a winning ticket is $100 (100% return on your ‘investment’) and the average payout is $165 (> 200%).

Vegas casinos operate on an overall margin of about 5%. So why would anyone buy a scratch ticket when they could gamble at one of the hundreds of Vegas-style casinos that are popping up all over the country? (I have at least 4 within driving distance of my home and more are due to open soon.)

The answer, I believe, is simple: the average gambler has zero chance of becoming a millionaire at a casino; but she has a small, non-zero probability of becoming a millionaire playing the lottery. Our prototypical gambler is willing to swap a 5% margin for a 25% margin because the latter includes the possibility of a 7, or even 10, figure payout.

Many politicians and economists have noted that lower income people spend a higher percentage of their wages on lottery tickets than higher income folks. Of course they do! Higher income earners are able to save money systematically; they have the option to participate in HSAs, IRAs, 401(k)s and other tax advantaged accumulation vehicles. They can ‘play the market’…or even buy cash value life insurance. 

A dollar invested in the DJIA 15 years ago is worth $10 today. $1 invested in Apple on the same day is now worth $100. Beats any savings account I’ve ever had! Of course, you have to know what to buy and when to buy it; but we enjoy thinking we can outsmart the experts…and occasionally we do. Unfortunately, though, many Americans don’t have ready access to the equity market.

Me? I certainly would not describe myself as low income, but neither do I have preferred access to hot new IPOs; so yes, I buy lottery tickets…every chance I get.

So here’s the fundamental question: does playing a ‘good’ state lottery (the quality varies widely from state to state) constitute a viable financial strategy for someone of modest means? The answer, surprisingly, is yes! 

The state lottery is just about the only financial vehicle that offers people of modest means a realistic opportunity to materially impact their economic circumstances. And isn’t that what we play for? A state lottery takes a little from the many but delivers a lot to a few. Hmm, sounds like the worst form of ‘robber baron capitalism’, doesn’t it? Where’s Bernie Sanders when we need him?

But wait! The ‘few’ in this case are ‘selected’ randomly. You don’t need to be rich to win the lottery. You don’t need to have attended a posh prep school; you don’t even need an Ivy League education. Nor do you need to be born a genius…or work 60 hours a week. The lottery is a way, often virtually the only way, for ordinary Janes and Joes, albeit just a few of them, to change their circumstances.

Oh, and BTW, here are some questions you will not be asked by a licensed lottery agent:

  • Where did you go to school?

  • What is your race, religion, gender preference or sexual orientation?

  • Where do you work and how much do you make?

  • Are you living in the United States legally?

  • Have you ever been convicted of a felony?

  • What’s your credit score?

Still not convinced! Ok then, perhaps you’ll consider a more eleemosynary argument: Out of the 25% typically retained by the state, a portion (5%) goes to overhead and to the retailers who sell the tickets. That in turn helps hold down the price of milk and eggs. 

The balance of the state’s share (25%) goes to fund various public programs at both the state and local level, such as education, healthcare and public works. Most of these programs benefit people of modest means as much or more than they do the 1%-ers. 

Were it not for lottery revenues, higher taxes would be required to fund those programs. Such taxes could take the form of job killing levies on corporations and high income earners or broad based, regressive taxes on fast foods, fossil fuels, or retail sales generally. In either case, the loss of lottery revenue would impact lower income residents negatively…and disproportionately.

So a dollar invested in a good state lottery wins twice. If you don’t win a prize, you still potentially benefit from improved public services, lower taxes, and enhanced economic growth. Understood this way, the Lottery’s overall value proposition looks pretty attractive after all. Arguably, it’s the paradigmatic example of ‘doing well by doing good’. 

I buy a lottery ticket every week…but I never win. Poor me! But the money I lose comes back to me, and others, in the form of lower taxes and enhanced public services. Or just maybe I do win after all, maybe I win big! Then it’s money well spent, wouldn’t you say?

According to American political folklore, we 99%-ers are supposed to spend our days wringing our hands, stomping our feet, resenting the 1%. But for the most part, we don’t! Sorry, Bernie. More often, we take whatever steps we can to improve our economic lot; and one of those steps might just be the judicious purchase of state lottery tickets.


David Cowles is the founder and editor-in-chief of Aletheia Today Magazine. He lives with his family in Massachusetts where he studies and writes about philosophy, science, theology, and scripture. He can be reached at


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