The tradition of lotteries came to America from Europe, where they first started gaining traction in the 16th century. According to one scholar, the first lottery used to raise government revenue and offer a cash prize was held in Florence, Italy, in 1530. Soon France picked up on this innovative means of raising money, and the British crown adopted the lottery in 1569. By the 1700s, lotteries were a popular way to raise money for all sorts of projects and were seen less as a sinful pastime than a civic duty. In the early 18th century, The Independent reports, the Archbishop of Canterbury lent his good name to lotteries funding the British Museum and Westminster Bridge.

From the earliest days of colonial history in America, lotteries were essential to the project’s survival. In the summer of 1612, the Virginia Company held a lottery to raise additional funding for the struggling settlement at Jamestown. (A tailor named Thomas Sharplisse won the largest prize—4,000 crowns, a small fortune.) Three years later, the company tried the same gambit, with a focus on the greater good that would come from white people colonizing the New World. “As pitched by the Virginia Company, buying a lottery ticket was an act of charity that could save a savage’s soul,” Matthew Sweeney writes in The Lottery Wars.

The Continental Congress used lotteries to raise money, 1776. 

The Continental Congress used lotteries to raise money, 1776. RON SHELLEY/PUBLIC DOMAIN

Lotteries didn’t just save the Virginia Company’s settlers from starvation, though. When the colonies revolted against the crown, lotteries helped the new United States of America survive. In 1776, the Constitutional Congress held one to benefit the soldiers of the Revolution. (Since the value of the new country’s currency was fluctuating wildly, it was less successful than hoped.) Once the colonies won the war, the new states leaned heavily on lotteries to raise revenue, in part because they were not eager to tax newly independent citizens who’d just rebelled against taxation by a central authority. Lotteries funded the growth of the country’s earliest colleges, including the College of New Jersey (later Princeton), Dickinson College, Harvard, and Yale, of many, many churches, and of iconic buildings, including Boston’s Faneuil Hall, which needed to be rebuilt after it burned down in 1761.

But in the 19th century, the popularity of lotteries waned as they were haunted by corruption. It was easy enough to announce a lottery, sell tickets, and abscond with the money without offering a prize. In New York and Massachusetts, lotteries were banned in the 1830s, and later in the century most states followed suit. Government lotteries wouldn’t become popular again until the second half of the 20th century, when states started using them once again—to raise revenue without raising taxes.

In the United States, lotteries are run by 48 jurisdictions: 45 states plus the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

Lotteries are subject to the laws of and operated independently by each jurisdiction, and there is no national lottery organization. However, consortiums of state lotteries jointly organize games spanning larger geographical footprints, which in turn, carry larger jackpots. Two major lottery games, Mega Millions and Powerball, are both offered in nearly all jurisdictions that operate lotteries, and serve as de facto national lotteries.

In fiscal 2018, Americans spent $77.7 billion on various lotteries, up about $5 billion from 2017.[1]

History

Historian Neal Millikan using newspaper advertisements in the colonial era found at least 392 lotteries were held in the 13 colonies.[2]

Lotteries were used not only as a form of entertainment but as a source of revenue to help fund the colonies. The financiers of Jamestown, Virginia, for instance, funded lotteries to raise money to support their colony.[3] These lotteries were quite sophisticated for the time period and even included instant winners.[3] Not long after, each of the 13 original colonies established a lottery system to raise revenue.[3]

In the early post-independence era, legislators commonly authorized lotteries to fund schools, roads, bridges, and other public works.[4] Evangelical reformers in the 1830s began denouncing lotteries on moral grounds and petitioned legislatures and constitutional conventions to ban them.[5] Recurring lottery scandals and a general backlash against legislative corruption following the Panic of 1837 also contributed to anti-lottery sentiments.[5] From 1844 to 1859 alone, 10 new state constitutions contained lottery bans.[5] By 1890, lotteries were prohibited in every state except Delaware and Louisiana.[6]

Lotteries in the United States did not always have sterling reputations. One early lottery in particular, the National Lottery, which was passed by Congress for the beautification of Washington, D.C. and was administered by the municipal government, was the subject of a major U.S. Supreme Court decision – Cohens v. Virginia.[7]

The lottery never paid out,[3][clarification needed] and it 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.[3] 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.[3] In 1868, after years of illegal operation, the Louisiana State Lottery Company obtained a 25-year charter for its state lottery system.[3] The charter was passed by the legislature due to immense bribing from a criminal syndicate in New York.[3] The Louisiana Lottery Company derived 90% of its revenue from tickets sold across state borders.[3] These continued issues of corruption led to the complete prohibition of lotteries in the United States by 1895.[3] 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 bribery.[3] Before the advent of government-sponsored lotteries, many illegal lotteries thrived, such as number games.

Modern era

The first modern government-run US lottery was established in Puerto Rico in 1934.[8] This was followed, decades later, by the New Hampshire Lottery in 1964. Instant lottery tickets, also known as scratch cards, were introduced in the 1970s and have become a major source of lottery revenue. Individual lotteries often feature three-digit and four-digit games akin to numbers games; a five number game, and a six number game (the latter two often have a jackpot.) Some lotteries also offer at least one game similar to keno, and some offer video lottery terminals. Presently, many US lotteries support public education systems.

As of November 2019, lotteries are established in 45 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands; the most recent U.S. state to legalize a lottery is Mississippi, with lottery commission members receiving appointments on October 19, 2018.[9]

The first U.S. multi-state lottery game was formed in 1985 in Maine, New Hampshire, and Vermont; its flagship game remains Tri-State Megabucks. In 1988, the Multi-State Lottery Association (MUSL) was formed with Iowa, Kansas, Missouri, Oregon, Rhode Island, West Virginia, and the District of Columbia as its charter members; it is best known for Powerball, which was designed to create large jackpots. Another joint lottery, The Big Game (now called Mega Millions), was formed in 1996 by six lotteries as its charter members.

As of October 2020, each of the 45 state lotteries offer both Mega Millions and Powerball as a result of a 2009 agreement between the Mega Millions consortium and MUSL to cross-license their game to one another's members, although the two organizations continue to administer Mega Millions and Powerball separately. Mississippi was the most recent to join both, beginning sales in January 2020. Puerto Rico is the only jurisdiction not to offer both, as they do not offer Mega Millions.

State revenues

State lotteries have become a significant source of revenue for states, raising $17.6 billion in profits for state budgets in the 2009 fiscal year (FY) with 11 states collecting more revenue from their state lottery than from their state corporate income tax during FY2009.[10]

Lottery policies within states can have conflicting goals.[11] Given 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.[11] 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.[11] This led to an IRS investigation into alleged non-reporting of income because the IRS considered the coupons to have monetary value.[11]

States with no lotteries

Among the states that do not have lotteries, Alabama cites religious objections and Utah's state constitution bans all forms of gambling.[12] Nevada's gambling industry has lobbied against a state lottery there, fearing the competition;[13] similarly, the Mississippi Gaming Commission expressed concern that a state lottery would constitute a "competing force" for gambling dollars spent at Mississippi casinos. Despite this, in August 2018, Mississippi passed legislation to create a state lottery. Governor Phil Bryant expressed his support for the lottery to fund transportation in the state and has indicated he will sign the bill. Sales, initially only scratch tickets, began on November 25, 2019. Mega Millions and Powerball tickets became available to the state on January 30, 2020.[14]

Alaska and Hawaii, being outside the contiguous United States, have not felt the pressure of losing sales to competitors.[12] However, in February 2020, Alaska's governor Mike Dunleavy introduced legislation proposing the establishment of an Alaska Lottery Corporation, as part of an effort to overcome a budgetary deficit.[15]