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History

Gambling as a generalization has roots in the United States and other English colonies as far back as the 1600s . Not every colony allowed gaming, however. The Massachusetts-Bay Colony, for example, did not allow cards, dice or gaming tables, even in private residences . In most colonies however, gambling was seen as a harmless distraction, as long as it was played in a gentlemanly manner . The acceptance of gambling in the colonies was fairly short-lived by English investors, as it was seen as a sign of laziness and as a vice. The investors saw gambling as a root cause of the colonies' inability to sustain themselves.

While lotteries were not only used as a form of entertainment, they were a revenue source to help fund the colonies. The financiers of Jamestown for instance, funded lotteries in order to raise money to support their colony. These lotteries were quite sophisticated for the time period and even included instant winners . Not long after, each of the 13 original colonies established a lottery system to raise revenue, and playing the lottery became a civic responsibility . Lottery proceeds were used to build churches and libraries, as well as Harvard, Yale, Dartmouth, and other of the nation's most prominent universities .

Early Lotteries

Lotteries in the United States did not always have a sterling reputation. One lottery in particular was passed by Congress in 1823 for the beautification of Washington D.C. and was never paid out. . This lottery brought to light the prevalent issue of crookedness amongst the lotteries in the United States. The wave of anti-lottery protests finally broke through when, by 1860, all states had prohibited lotteries except Delaware, Missouri, and Kentucky . The scarcity of lotteries in the United States meant that tickets were shipped across the country and eventually led to the creation of illegal lotteries . In 1868, after years of illegal operation, the Louisiana Lottery Company obtained a 25 year charter for its state lottery system . The charter was passed by the Legislature due to the immense bribing from a criminal syndicate in New York . The Louisiana Lottery Company was a huge money maker and 90% of its revenue came from tickets sold across state borders . These continued issues of corruption led to the complete prohibition of lotteries in the United States by 1895 . It was discovered that the promoters of the Louisiana Lottery Company had accrued immense sums of money from illegitimate sources and that the Legislature was riddled with briberies.

From late 1894 to 1964, there were no legal government-sponsored lotteries in the United States . However, the Irish sweepstakes taking place to fund Irish hospitals was vastly popular and 13 percent of the United States population had bought a ticket that was illegally smuggled in from Ireland . Due to the growing opposition of tax increases, state sponsored lotteries made a resurgence . In 1964, New Hampshire began the first state-sponsored lottery and was followed quickly by New York in 1967 . When New Jersey developed its own state-sponsored lottery in 1971, it most mirrored the lotteries seen today . New Jersey's lottery was economically successful because it stressed low costs to play and frequency of payouts, much like the modern lotteries . Not long after New Jersey's lottery success, many attempts were made to develop a national lottery, but the bill never passed through Congress . Instant lottery tickets, or scratch-offs, first surfaced in the 1970s. Instant tickets require players to match a certain number of images or numbers representing the same prize, and the winner receives that prize . Scratch-offs have become a significant revenue source and the majority are themed, with games linked to sports, board games, or even gambling such as poker .

Lottery Policy Today

There is very little published regarding all-encompassing rules of every lottery game in the United States today. Each state's legislature makes the decision whether to fund a lottery . With this decision-making power comes the ability also to make the rules governing each lottery . While it is the choice of individual states, there are intrastate lottery organizations such as Powerball and Mega Millions that connect players from all across the country . Powerball is played among 29 different states and Mega Millions among 12.

The internet has revolutionized the way lotteries are played. People are now able to play web-only lotteries as well as play traditional lotteries with online payments . Scratch-offs have even surfaced on the internet . Instant games are now available with a simple flash player .

Lottery policies within states can have conflicting goals . Being that instructions are passed down from state legislatures, lottery implementation is often expected to be carried out with reduced advertising and funding while still producing the same amount of revenue . This issue led states to look for loopholes in the system. Massachusetts for example, had its advertising budget dramatically cut, and therefore started using free-play coupons as money to pay for advertising . This led to an IRS investigation into alleged non-reporting of income because in the eyes of the IRS, the coupons had monetary value . The major issue this situation presents is the importance of governance over revenue-producing activities .

Case Studies

Arizona

Looking first at the lottery system in Arizona, the mission statement illustrates the goals of the lottery. It states that the goal of the Arizona lottery is to support Arizona programs for the public benefit by maximizing revenue in a responsible manner . Arizona became the first state west of the MIssissippi to approve a lottery when the statewide public initiative passed in November 1980 . While the original referendum passed by only a slim margin, recent votes have shown an immense approval rating . In 2002, a vote to extend the lottery for another ten years was passed by 73% . More recently, the lottery was extended to 2035 with legislation passed in 2010 .

The revenues produced by the Arizona lottery are used to help fund four different public programs .The first area of funding is the economic and business development division . The lottery gives 3.5 million dollars to help fund grants expanding and maintaining Arizona businesses as well as attracting new businesses to the state to promote economic development. The second division that receives lottery funding is the education division . According to Arizona statutes, the education fund can receive up to 31 million dollars from the sale of lottery products . Also, the fund can receive additional funds from the lottery fund once monies have been distributed to all other divisions, up to 15.49 million dollars. Education receives 55.5% of the lottery's general fund . Additionally, funding goes to the environmental issues division for public access, environmental education, schoolyard habitats, and the protection and management of urban wildlife . Environmental issues receive .4% of the lottery's general fund . The final division receiving lottery funds is health and public welfare . This division receives 44.1% of the lottery's general fund while 1 million dollars go to homeless transitional shelters, 17 million dollars go to Healthy Arizona, Problem Gambling receives 300,000 dollars and the Court Appointed Special Advocate Program receives 30% of unclaimed prize money .

Florida

Florida passed the legislation to enact the lottery in 1986 by a two to one ratio. The new lottery was spearheaded by Governor Bob Martinez and the Florida legislature with the mission of maximizing revenues for the enhancement of public education in Florida . The lottery was founded on the basis that it would provide the people of Florida the opportunity to benefit from additional revenues while providing the highest quality games available . The lottery's first game, MILLIONAIRE was a $1 scratch-off that was immensely popular. Within 17 days, the scratch-off game had paid back the entire $15.5 million to the state's general fund. Florida currently offers seven terminal games including: Florida Lotto, Cash 3, Play 4, Fantasy 5, Mega Money, Powerball, and Lucky Lines.

With the goal of the Florida lottery being to enhance public education in the state, the lottery has become not only an education partner but a distinguished business enterprise as well.