State Lottery

A game of chance operated by a state government.

Generally a lottery offers a person the chance to win a prize in exchange for something of lesser value. Most lotteries offer a large cash prize, and the chance to win the cash prize is typically available for one dollar. Because the number of people playing the game usually exceeds the number of dollars paid out, the lottery ensures a profit for the sponsoring state.

Lotteries can come in a variety of forms, but there are three basic versions: instant lotteries, general lotteries, and lotto. Instant lotteries offer immediate prizes and consist of such games as scratch-off tickets and pull tabs. A general lottery is a drawing with a payout based on a percentage of the amount in the aggregate wagering pot; because all numbers bet for the particular game are included in the drawing, a winner is guaranteed. Lotto is similar to a general lottery in that the winning number is chosen in a drawing. However, the winning number in a lotto game is chosen by a computer, and the computer may not pick a number or sequence of numbers that is held by a player. If no player has a number that matches the number chosen by the computer, the cash prize rolls over into the next game's drawing. Lotto usually generates more money than other lotteries. A player must match a long sequence of numbers, and this raises the odds against the players, which in turn makes it more likely that the cash prize will increase. Most of the other forms of lotteries are spin-offs of these three basic forms.

More than thirty states have state-run lotteries. These lotteries are administered by state agents and agencies, such as a director of the state lottery and a state lottery board. State legislatures create lotteries and lottery agencies in statutes. These statutes specify details of the game, such as the length of time a winner has to claim a prize after the relevant drawing, the documentation a winner must present to claim a prize, the manner of payment of the prize, and procedures in case a prize is won by a corporation or other legal entity.

State statutes also specify just how the money generated by the lotteries will be used. Many states direct that the profits should go into the state's general revenue fund, whereas other states earmark the profits for a particular endeavor, such as public school education, care of SENIOR CITIZENS, or economic development.

States must be careful to observe the dictates of the statute that creates the lottery or lotteries. Other kinds of GAMING that are not strictly limited to chance are not allowed under state lottery statutes. Indeed, most states make gambling a criminal offense and provide exceptions only for state lotteries and gaming by Native American tribes. A state may not, for example, sponsor a game that involves wagering against a house, such as a dice game, blackjack, or shell games. In Western Telcon, Inc. v. California State Lottery, 13 Cal. 4th 475, 917 P.2d 651, 53 Cal. Rptr. 2d 812 (1996), the Supreme Court of California ruled that a keno game offered by the California State Lottery (CSL) was not authorized under proposition 37, the 1984 initiative measure that created the state lottery. In keno, players try to match between one and ten numbers to a set of twenty numbers that are selected at random. Players pay a nominal fee for the opportunity to receive a large payoff. Keno, according to the court, did not meet the statutory definition of lottery because it was a game that persons played against the CSL, which, as banker, bet against each participant that the participant would not correctly guess the numbers to be drawn. This kind of game did not offer a prize by chance. Instead, the CSL could win all the bets and never have to pay a prize, or it could lose all the bets and pay a prize to each participant. This kind of gaming was too similar to a banking game, and the court noted that "the voters, in Proposition 37, did not establish a state gambling house, but a state lottery."

State lotteries often are planned to augment or even supplant other sources of state revenues, such as taxes. Whether they can actually achieve this objective depends on the lotteries' ability to attract players.

A billboard advertises the South Carolina Education Lottery. State statutes specify how the money generated by lotteries will be used.
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