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*[[Japan]]: ''Takarakuji''
*[[Japan]]: ''Takarakuji''
*[[Malaysia]]: ''Sports Toto'', ''Magnum'' and ''Magnum 4D'', ''[[Pan Malaysian Pools]] (da ma chai)''
*[[Malaysia]]: ''Sports Toto'', ''Magnum'' and ''Magnum 4D'', ''[[Pan Malaysian Pools]] (da ma chai)''
*[[Philippines]]: [[Philippine Lotto Draw]]
*[[Philippines]]: ''[[Philippine Lotto Draw]]''
*[[Singapore]]: ''[[Toto (gaming)|TOTO]]'', ''4D''
*[[Singapore]]: ''[[Toto (gaming)|TOTO]]'', ''4D''
*[[South Korea]]: ''Lotto''
*[[South Korea]]: ''Lotto''

Revision as of 04:34, 28 September 2007

For other articles concerned with Lotteries see Lottery (disambiguation).

A lottery is a popular form of gambling which involves the drawing of lots for a prize. Some governments outlaw it, while others endorse it to the extent of organizing a national lottery. It is common to find some degree of regulation of lottery by governments.

The first signs of a lottery trace back the Han Dynasty between 205 and 187 B.C., where ancient Keno slips were discovered. The lottery has helped finance major governmental projects like the Great Wall of China.

The first known European lottery occurred during the Roman Empire, and was mainly done as a form of amusement at dinner parties. Each guest would receive a ticket, and prizes would often consist of fancy items such as dinnerware. Every ticket holder would be assured of winning something. The first European lottery to award money was held in Florence, Italy in 1530. As with the earlier Roman style lottery, all ticket holders would be eligible for a small prize, such as a trinket, for playing.

The Dutch were the first to shift the lottery to solely money prizes and base prizes on odds (roughly about 1 in 4 tickets winning a prize). The lottery proved to be very popular, and was hailed as a painless form of taxation. In the Netherlands the lottery was used to raise money for e.g. supporting poor people, building dikes, construction of defense works for towns and to buy free sailors from slavery in the Arab countries. The English word lottery stems from the Dutch word loterij, which is derived from the Dutch noun lot meaning fate. The Dutch state owned staatsloterij is the oldest still existing lottery.

Lotteries come in many formats. The prize can be fixed cash or goods. In this format there is risk to the organizer if insufficient tickets are sold. The prize can be a fixed percentage of the receipts. A popular form of this is the "50-50" draw where the organizers promise that the prize will be 50% of the revenue. The prize may be guaranteed to be unique where each ticket sold has a unique number. Many recent lotteries allow purchasers to select the numbers on the lottery ticket resulting in the possibility of multiple winners.

Lotteries are most often run by governments or local states and are sometimes described as a regressive tax, since those most likely to buy tickets will typically be the less affluent members of a society. The astronomically high odds against winning have also led to the epithets of a "tax on stupidity", "math tax" or the oxymoron "voluntary tax" (playing the lottery is voluntary; taxes are not). They are intended to suggest that lotteries are governmental revenue-raising mechanisms that will attract only those consumers who fail to see that the game is a very bad deal. Indeed, the desire of lottery operators to guarantee themselves a profit requires that an average lottery ticket be worth substantially less than what it costs to buy. After taking into account the present value of the lottery prize as a single lump sum cash payment, the impact of any taxes that might apply, and the likelihood of having to share the prize with other winners, it is not uncommon to find that a ticket for a typical major lottery is worth less than one third of its purchase price.

The fact that lotteries are commonly played leads to some contradictions against standard models of economic rationality. However, the expectations of some players may not be to win the game, but to experience the thrill and indulge in a fantasy of possibly becoming wealthy. Even ignoring the thrill factor, there is the theoretical possibility that the purchase of a lottery ticket could represent a gain in expected utility, even though it represents a loss in expected monetary value, thus making the purchase a rational decision. Insurance, for instance, represents negative expected monetary value but is not considered to be a tax on stupidity because it is generally believed to deliver positive expected utility to the individual.

Lottery tickets are usually scanned in large numbers, using marksense-technology. With today's computer performance, it takes less than one second to check if a particular combination was picked up by anyone, even for lotteries like Euromillions or MegaMillions.

Countries with a national lottery

This maneki neko beckons customers to purchase takarakuji tickets in Tokyo, Japan.

Americas

Europe

Asia

Africa

Australia

Country Lottery details

In several countries, lotteries are legalized by the governments themselves. In addition, with the explosion of the internet, several online web-only lotteries and traditional lotteries with online payments have surfaced. In the web-only lotteries, the user has to select his pick and either watch an ad for a few seconds before his pick is confirmed or has to click on a web banner/link to register his pick in the system. The numbers may be drawn by the site that runs the online lotto or might be linked to a major physical lotto draw to ensure reliability. Prize money ranges from $100,000 to $10 million.

Lottery in the United States

Main article: Lotteries in the United States

In the United States, the existence of lotteries is subject to the laws of each state; there is no national lottery.

Header from 1840 US patent on a new type of private lottery

Private lotteries were legal in the United States in the early 1800’s.[1] In fact, a number of US patents were granted on new types of lotteries. In today's vernacular, these would be considered business method patents.

Before the advent of state-sponsored lotteries, many illegal lotteries thrived; for example, see Numbers game and Peter H. Matthews. The first modern state lottery in the U.S. was established in the state of New Hampshire in 1964; today, lotteries are established in 42 states, the District of Columbia, and the Virgin Islands.

The first modern interstate lottery in the U.S. was formed in 1985 and linked three of the New England states. In 1988, the Multi-State Lottery Association (MUSL) was formed with Oregon, Iowa, Kansas, Rhode Island, West Virginia, Missouri, and the District of Columbia as its charter members; it is best known for its "Powerball" drawing, which is designed to build up very large jackpots. Another interstate lottery, The Big Game (now called Mega Millions), was formed in 1996 by the states of Georgia, Illinois, Massachusetts, Maryland, Michigan and Virginia as its charter members. These states were joined by New Jersey (1999), New York and Ohio (2002), Washington (2002), Texas (2003) and California (2005) for a total of 12 members. [4]

Instant lottery tickets, also known as scratch cards, were first introduced in the 1970s and have since become a major source of state lottery revenue. Some states have introduced keno and video lottery terminals (slot machines in all but name).

Other interstate lotteries include Hot Lotto and Wild Card 2, two of MUSL's other games.

With the advent of the Internet it became possible for people to play lottery-style games on-line, many times for free (the cost of the ticket being supplemented by merely seeing, say, a pop-up ad). Two of the many websites which offer free games (after registration) include iwinweekly.com and the larger iWon.com, which is a wholly-owned subsidiary of IAC Search & Media. GTech Corporation, in the United States, administers 70% of the worldwide online and instant lottery business, according to its website. With online gaming rules generally prohibitive, "lottery" games face less scrutiny. This is leading to the increase in web sites offering lottery ticket purchasing services, charging premiums on base lottery prices. The legality of such services falls into question across many jurisdictions, especially throughout the United States, as the gambling laws related to lottery play generally have not kept pace with the spread of technology.

Presently, many state lotteries in the USA donate large portions of their proceeds to the public education system. However these funds frequently replace instead of supplement conventional funding, resulting in no additional money for education.

Lottery in Canada

File:Loto-quebec.jpg
Loto-Quebec promotional photoshoot.

The first lottery in Canada was Quebec's Inter-Loto in 1970. Other provinces and regions introduced their own lotteries through the 1970s, and the federal government ran Loto Canada (originally the Olympic Lottery) for several years starting in the late 1970s to help recoup the expenses of the 1976 Summer Olympics. Lottery wins are generally not subject to Canadian tax, but may be taxable in other jurisdictions, depending on the residency of the winner.[5]

Today, Canada has two nation-wide lotteries: Lotto 6/49, and Lotto Super 7 (which started in 1994). These games are administered by the Interprovincial Lottery Corporation, which is a consortium of the five regional lottery commissions, all of which are owned by their respective provincial and territorial governments:

Lottery in France

The first known lottery in France was created by King Francis I in or around 1505. After that first attempt, lotteries were forbidden for two centuries.

They reappeared at the end of 17th century, as a "public lottery" for the Paris municipality (called Loterie de L'Hotel de Ville) and as "private" ones for religious orders (mostly for nuns in convents).

Lotteries became quickly one of the most important resources for religious congregations in the 18th century.

Lotteries helped to build or rebuild many churches (about 15 including the biggest ones) in Paris during the 18th century, including St Sulpice and Le Panthéon.

At the beginning of the century, the King avoided having to fund religious orders by giving them the right to run lotteries, but the amounts generated became so large that the second part of the century turned into a struggle between the monarchy and the Church for control of the lotteries. In 1774, the Loterie de L'École Militaire was founded by the monarchy (by Mme de Pompadour to be precise, to buy what is called today the Champ de Mars in Paris, and build a Military Academy that Napoleon Bonaparte would later attend) and all other lotteries, with 3 or 4 minor exceptions, were forbidden.

This lottery became known a few years later as the Loterie Royale de France. Just before the French Revolution in 1789 the revenues from La Lotterie Royale de France were equivalent to between 5 and 7% of total French revenues.

Throughout the 18th century, philosophers like Voltaire as well as some bishops complained that lotteries exploit the poor. This subject has generated much oral and written debate over the morality of the lottery.

All lotteries (including state lotteries) were frowned upon by idealists of the French Revolution, who viewed them as a method used by the rich for cheating the poor out of their wages.

The Lottery reappeared in France in 1936, called loto, when socialists needed to increase state revenue. Since that time, La Française des Jeux (government owned) has had a monopoly on most of the games in France, including the lotteries.

Lottery in New Zealand

Main article: Lotteries in New Zealand

Lotteries in New Zealand are controlled by the New Zealand government. A state owned trading organisation, the New Zealand Lotteries Commission, operates low prize scratch ticket games and powerball type lotteries with weekly prize jackpots. Lottery profits are distributed by The New Zealand Lottery Grants Board's directly to charities and community organisations. Sport and Recreation New Zealand, Creative New Zealand, and the New Zealand Film Commission are statutory bodies that operate autonomously in distributing their allocations from the Lottery Grants Board.

The lotteries are drawn on Saturday and Wednesday. Lotto is sold via a network of computer terminals in shopping centers across the nation. The Lotto game was first played in 1987 and replaced New Zealand's original national lotteries, the Art Union and the Golden Kiwi. Lotto is a pick 6 from 40 numbers game. The odds of winning the first division prize of around NZ$300,000 to NZ$2 million are 1 in 3,838,380.

The Powerball game is the standard pick 6 from 40 lotto numbers with an additional pick 1 from 8 powerball number. This game has odds of 1 in 30,707,040 and a first prize of between NZ$1million and NZ$15million. Big Wednesday is a game played by picking 6 numbers from 45 plus heads or tails from a coin toss. A jackpot cash prize of NZ$1million to NZ$15 million is supplemented with product prizes such as Porsches, boats and holiday homes. The odds of winning first prize are 1 in 16,290,120. Results services for these games can be found at NZ Lotto Results.

Probability of winning

The chances of winning a lottery jackpot are principally determined by several factors: the count of possible numbers, the count of winning numbers drawn, whether or not order is significant and whether drawn numbers are returned for the possibility of further drawing.

In a typical 6 from 49 lotto, 6 numbers are drawn from 49 and if the 6 numbers on a ticket match the numbers drawn, the ticket holder is a jackpot winner - this is true regardless of the order in which the numbers are drawn. The odds of being the jackpot winner are approximately 1 in 14 million (13,983,816 to be exact). The derivation of this result (and other winning scores) is shown in the Lottery mathematics article. To put these odds in context, suppose one buys one lottery ticket per week. 13,983,816 weeks is roughly 269,000 years; In the quarter-million years of play, one would only expect to win the jackpot once.

The odds of winning any actual lottery can vary widely depending on lottery design. "Mega Millions" is a very popular multi-state lottery in the United States which is known for jackpots that grow very large from time to time. This attractive feature is made possible simply by designing the game to be extremely difficult to win: 1 chance in 175,711,536. That's over twelve times smaller than the example above. Mega Millions players also pick six numbers, but two different "bags" are used. The first five numbers come from one bag that contains numbers from 1 to 56. The sixth number -- the "Mega Ball number" -- comes from the second bag, which contains numbers from 1 to 46. To win a Mega Millions jackpot, a player's five regular numbers must match the five regular numbers drawn and the Mega Ball number must match the Mega Ball number drawn. In other words, it is not good enough to pick 10, 18, 25, 33, 42 / 7 when the drawing is 7, 10, 25, 33, 42 / 18. Even though the player picked all the right numbers, the Mega Ball number at the end of the ticket doesn't match the one drawn, so the ticket would be credited with matching only four numbers (10, 25, 33, 42).

The SuperEnalotto of Italy is supposedly the most difficult where players try to match 6 numbers out of 90. The odds in making the jackpot; 1 in 622,614,630.

Most lotteries give lesser prizes for matching just some of the winning numbers. The Mega Millions game is an extreme case, giving a very small payout (US$2) even if a player matches only the Mega Ball number at the end of your ticket. Matching more numbers, the payout goes up. Although none of these additional prizes affect the chances of winning the jackpot, they do improve the odds of winning something and therefore add a little to the value of the ticket. In most lotteries, if a large amount of smaller prizes are awarded, the jackpot will be reduced, in a similar manner that if the jackpot is divided if multiple players have tickets with all the winning numbers.

In the UK National Lottery the smallest prize is £10 for matching three balls. There exists a Wheeling Challenge to create the smallest set of tickets to cover enough combinations to ensure that any 6 numbers drawn will match against at least 3 numbers on at least one of the tickets. The current record is 163 tickets.

The expected value of lottery bets is often notably bad. In the United States, an expected value of 50% of the purchase price is common. For instance, when the player buys a lottery ticket for, say, $10 he obtains a financial asset with an expected value of only $5. Hence, buying a lottery ticket reduces the buyers expected net worth. This is in contrast with financial securities like stocks and bonds whose prices are theoretically based on their expected real values, as expected by the markets at any given point in time.

In a famous occurrence, a Polish-Irish businessman named Stefan Klincewicz bought up almost all of the 1,947,792 combinations available on the Irish lottery. He and his associates paid less than one million Irish pounds while the jackpot stood at £1.7 million. There were three winning tickets, but with the "Match 4" and "Match 5" prizes, Klincewicz made a small profit overall.

Notable prizes

Prize Lottery Country Name Date Notes
$390m Mega Millions United States Won by one ticket holder from New Jersey and one from Georgia 6 March 2007 World's largest jackpot
$365m Powerball United States One ticket bought jointly by eight co-workers at a Nebraska meat processing plant 18 February 2006 World's largest single winner
$363m The Big Game United States Two winning tickets: Larry and Nancy Ross (Michigan), Joe and Sue Kainz (Illinois) 9 May 2000 The Big Game is now named Mega Millions
€180m ($238m) EuroMillions France(2), Portugal(1) Three ticket holders 3 February 2006 Europe's largest jackpot
€115m ($152m) EuroMillions Ireland Dolores McNamara 29 July 2005 Europe's largest single winner and the world's largest single payout.
€71.8m ($91.6m) SuperEnalotto Italy One ticket bought jointly by ten bar customers in Milan 4 May 2005 Largest Italian prize
£42m ($81m) National Lottery United Kingdom Three ticket holders 6 January 1996 Largest UK prize
£35.4m ($71.4m) EuroMillions UK Angela Kelly, 40, East Kilbride, South Lanarkshire [6] 10 August 2007 Largest UK single winner
€37.6m ($49.6m) National Lottery Germany Won by a male nurse from North Rhine-Westphalia 7 October 2006 Largest German prize and single winner
€16.2 m ($22.2m) National Lottery Ireland Paul and Helen Cunningham 28 July 2007 Biggest single winner and jackpot (Ireland)

Sources:
http://www.usamega.com/archive-052000.htm
http://news.bbc.co.uk/1/hi/world/europe/4746057.stm
http://news.bbc.co.uk/1/hi/uk/4676172.stm
http://news.bbc.co.uk/1/hi/world/americas/4740982.stm
http://www.sisal.it/se/se_main/1,4136,se_Record_Default,00.html

On 20 September 2005 a primary school boy in Italy won £27.6 million in the national lottery. Although children are not allowed to gamble under Italian law, children are allowed to play the lottery. [7]

Payment of prizes

Winnings are not necessarily paid out in a lump sum, contrary to the expectation of many lottery participants. In certain countries, such as the USA, the winner gets to choose between an annuity payment and a one-time payment. The one-time payment is much smaller, indeed often only half, of the advertised lottery jackpot, even before applying any withholding tax to which the prize may be subject. The annuity option provides regular payments over a period that may range from 10 to 40 years.

In some online lotteries, the annual payments can be as little as $25,000 over 40 years, with a balloon payment in the final year. This type of installment payment is often made through investment in government-backed securities. Online lotteries pay the winners through their insurance backup. However, many winners choose to take the lump-sum payment, since they believe they can get a better rate of return on their investment elsewhere.

In some countries, lottery winnings are not subject to personal income tax, so there are no tax consequences to consider in choosing a payment option. In Canada, Australia, Ireland, and the United Kingdom all prizes are immediately paid out as one lump sum, tax-free to the winner.

Scams and frauds

Lottery, like any form of gambling, is susceptible to fraud, despite the high degree of scrutiny offered by the organizers. One method involved is to tamper with the machine used for the number selection. By rigging a machine, it is theoretically easy to win a lottery. This act is often done in connivance with an employee of the lottery firm. Methods used vary; loaded balls where select balls are made to pop-up making it either lighter or heavier than the rest. The type of materials used in producing the balls must be cleared. All balls should be tested live on t.v. for magnetic properties. It is elementary that the balls can all look and weigh the same but only its true material composition can spell the big difference. High-powered electricity + magnetism = a lot of possibilities.

The most infamous case of insider lottery fraud was in Pennsylvania in 1980. The Pennsylvania lottery determined its winner by an air blower, where three numbers would bubble up. By injecting fluid into every ball except those numbered 4 and 6, and then buying tickets with every combination of 4 and 6, lottery personnel guaranteed themselves big winnings. On a game that is based on the basis of get rich quick, those on the inside can be tempted to cash in on the winnings themselves.

In some US States, such as Kansas and Minnesota, losing lottery tickets can be mailed in for a raffle of special prizes. The trouble with that is that employees of stores that sell lottery tickets sometimes collect the lottery tickets that are thrown away and send them in. As a lottery official put it "The retailers have an unlimited supply of free tickets. You do not need to be an FBI agent to realize that is a tremendously unfair advantage." [2]

Some advance fee fraud scams on the Internet are based on lotteries. The fraud starts with spam congratulating the recipient on their recent lottery win. The email explains that in order to release funds the email recipient must part with a certain amount (as tax/fees) as per the rules or risk forfeiture.

Another form of lottery scam involves the selling of "systems" which purport to improve a player's chances of selecting the winning numbers in a Lotto game. These scams are generally based on the buyer's (and perhaps the seller's) misunderstanding of probability and random numbers. Sale of these systems or software is legal, however, since they mention that the product cannot guarantee a win, let alone a jackpot.

See also

References

  1. ^ Bellhouse, D.R., “The Genoese Lottery”, Statistical Science, vol. 6, No. 2. (May, 1991), pp. 141 -148
  2. ^ "Legalized Gambling; America's Bad Bet" by John Eidsmoe
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