The Risks of Winning a Lottery


Lotteries are an inherently risky endeavor, but if you manage to win one, there are a few things that every winner needs to know. For starters, experts say it’s best to keep your mouth shut until you have a team of lawyers and financial advisers lined up. Second, you need to document your windfall — especially if it’s a large amount of money. Make copies of both sides of your ticket, and keep it in a secure place that only you have access to. And finally, you should surround yourself with people that will help you avoid vultures and other scheming new-found relatives.

The practice of drawing for property, slaves and other prizes by chance is an ancient one. Lotteries first appeared in Europe during the fourteen-hundreds as a way for towns to raise funds to build fortifications or to help the poor. They were hugely popular and hailed as a painless form of taxation.

But it soon became obvious that the more money a lottery had to offer, the worse the odds of winning were. This seemed counterintuitive, even to Thomas Jefferson, who viewed it as no riskier than farming, and Alexander Hamilton, who grasped what would become a central insight: that everyone “would prefer a small chance of winning a great deal to a large chance of winning nothing.”

It took time, but eventually states realized that lotteries could be used to finance larger social safety nets without imposing especially onerous taxes on the middle class and the working class. The heyday of the state-run lotteries was during the postwar period, when states were trying to expand their services without increasing taxes. But this arrangement crumbled as inflation began to soar, and by the late ’60s it was clear that state governments needed a new source of revenue.

Currently, lotteries are largely operated by private companies. Most of the money they collect is earmarked to benefit public projects, but a significant percentage goes into corporate coffers. The rest is divvied up among the winners. This is the main reason why some people have a strong urge to play.

But there’s more than that. Lotteries also dangle the promise of instant wealth in an age of inequality and limited social mobility. And they are a major reason why so many Americans, particularly men, continue to spend an enormous amount of money on lottery tickets.

Lotteries promote two messages primarily: One is that playing the lottery is fun, that it’s an entertaining activity. This obscures the regressivity of the enterprise, as well as the fact that it’s an addictive activity that attracts lots of dedicated players who don’t take it lightly.

The other message that lotteries rely on is that they are good for the states because they raise money. But this is misleading, too. The percentage of state revenues that lottery money makes up is small, and it’s dwarfed by the amount that states lose to illegal gambling.