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1. History of the Lottery in the United States

When did the lottery start in the U.S.? It’s been a part of life since at least 1776, when the Continental Congress voted to use a lottery to raise money for the War of Independence.

Although the idea didn’t end up being used, lotteries were a popular way to raise funds in early America for expenses like paving roads, building wharves, and even constructing churches.

No one invented the lottery in America, because it was already used in England and spread to the New World. In fact, the Jamestown colony was partly financed by private lotteries in the 1600s.

A number of the Founding Fathers promoted lotteries, mostly unsuccessfully.

In 1768, George Washington held a lottery to fund building the Mountain Road in Virginia, but it failed.

Benjamin Franklin also unsuccessfully tried to use a lottery to buy cannon to defend Philadelphia during the Revolutionary War.

Thomas Jefferson was also a fan of lotteries. “Far from being immoral, they are indispensable to the existence of man,” he wrote. In 1826, the Virginia legislature gave Jefferson permission to conduct a private lottery to pay off his many debts. He died before it could be held, but it was unsuccessfully attempted by his children.

John Hancock was the exception to the rule, successfully using a lottery to finance the rebuilding of Faneuil Hall in Boston after it burned down in 1761.

Lotteries were widespread in the early American republic. In 1832 it was reported that 420 lotteries had been held in eight states in the last year.

Lotteries also helped fund many college buildings, including at Columbia, Dartmouth, Harvard, and Yale.

After the Civil War, the Southern states used lotteries to finance Reconstruction. However, corruption by the private lottery organizers led to increasing opposition.

In 1868 Congress outlawed the use of the mail for lottery advertising “or other similar enterprises on any pretext whatsoever.” In 1878, the Supreme Court decided that lotteries had “a demoralizing influence upon the people.”

The Louisiana lottery leads to ban

However, the most successful lottery in the country continued to flourish. The Louisiana lottery was privately run by the Louisiana Lottery Company. At its height it was estimated to achieve sales of over $20 million per year. Prizes in the monthly drawings went up to the princely sum of $250,000, and twice a year special prizes could rise to $600,000.

The company had agents in every U.S. city, and 93% of its revenue came from out of state. Special trains were needed to transport the huge volume of mail, including thousands of ticket receipts, sent to the company’s headquarters in New Orleans.

The company gained a monopoly as Louisiana’s lottery provider in 1868 through the extravagant bribes paid by its founder, Charles T. Howard. In exchange it was allowed to keep all lottery proceeds tax-free.

Howard became a very powerful figure in Louisiana, although he wasn’t popular with everyone. The Metairie Jockey Club wouldn’t let him become a member, so when their racecourse ran into trouble, Howard purchased it and turned it into a cemetery - where he is buried in a huge tomb.

Despite paying thousands in bribes, the company still made an impressive 48% profit. One reason for this was that if there were unsold tickets before a drawing, they were put into the barrel the winning numbers were drawn from (the drawings were overseen by two former Confederate generals, Jubal Early and P.G.T. Beauregard). In many cases, this trick led to the company winning its own prize money.

In 1890, the lottery’s charter was up for renewal, and company officials bribed lawmakers to put the lottery in the state Constitution. However, this required a public vote, and furious citizens rejected the amendment.

The federal government had also had enough. President Benjamin Harrison denounced lotteries as “swindling and demoralizing agencies” and Congress banned sending lottery tickets by mail or taking them across state lines, finishing off the lottery.

As the abuses of the Louisiana lottery became known, they caused a huge national scandal and the public soured on lotteries.

United States Lottery 2021

States legalize lotteries in the twentieth century

Opinion on lotteries began to soften again during the early twentieth century, especially after the disaster of Prohibition, which ran from 1920-1933 and involved widespread organized crime related to illegal alcohol operations.

Nevada made casinos legal in the 1930s, and betting to benefit charity became more widespread throughout the country. However, the lingering memory of the Louisiana scandal kept lotteries from gaining public support for another thirty years.

In 1963, the New Hampshire legislature allowed a sweepstakes to raise money for education. The funds were badly needed because the state had no income or sales tax to finance educational programs.

Based on the popular Irish Sweepstakes, a ticket cost $3 and the winners of horse races at the Rockingham Park racecourse determined the biggest prizes. Despite the drawings not being held regularly, almost $5.7 million worth of tickets were sold in the first year.

Not to be outdone, New York started its own lottery in 1967. It proved spectacularly successful, bringing in $53.6 million in its first year. Just like today, residents of neighboring states without lotteries were tempted to cross the border to buy tickets.

The success of the New York lottery didn’t go unnoticed, and twelve more states introduced their own lotteries in the 1970s – Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, Rhode Island and Vermont.

Why was the Northeast such fertile ground for lotteries? There seem to be three reasons.

First, the states needed money but didn’t want to take the always-unpopular step of raising taxes.

Second, each state had a large Catholic population that widely tolerated gambling.

Third, there was a domino effect: a state is much more likely to start a lottery if a nearby state already has one. The governor of North Carolina, Michael Easley, expressed a popular view when he promoted a lottery by saying, “Our people are playing the lottery. We just need to decide which schools we should fund, other states' or ours.”

Most lotteries in the 1970s were extremely slow-paced by today’s standards. In 1974, Massachusetts introduced the first instant win game using scratch-off tickets, but the majority of lotteries were “passive drawing games” - basic raffles where tickets printed with a number were sold. Players often had to wait weeks for a drawing, so the suspense must have been intense!

In the 1980s the lottery boom intensified, with seventeen more states plus the District of Columbia taking part: Arizona, California, Colorado, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Missouri, Montana, Oregon, South Dakota, Virginia, Washington, West Virginia, and Wisconsin.

The 1990s brought a further expansion of the lottery to six states - Georgia, Louisiana, Minnesota, Nebraska, New Mexico, and Texas.

In the 2000s they were joined by North Carolina, North Dakota, Oklahoma, South Carolina, and Tennessee.

Lotteries today

Lotteries have come a long way from the 1960s – so what types of lotteries are there? They come in a variety of forms, from the instant-win scratch-off cards to multi-state draw games like Powerball and Mega Millions.

There’s something to appeal to every kind of player, whether you want instant gratification, more chances to win, or the potential for a bigger prize.

Research shows that the majority of the U.S. public approves of lotteries. Even many people who don’t buy tickets themselves still have a positive view. In a 2014 Gallup poll, 62% said gambling is “morally acceptable.” State lotteries are the most common type of gambling in the country, with about half of those polled saying they had bought a lottery ticket in the past 12 months.

Which states have the lottery today? Currently, there are only five states that do not have lotteries: Alabama, Alaska, Hawaii, Nevada, and Utah.

Alabama could be the next state to introduce lotteries, and there are also persistent attempts to pass a lottery bill in Hawaii. In the past, Alaska had enough oil money that it didn’t need a lottery, but views about an Alaska lottery may be changing since the state has recently been short of revenue.

How much money does the lottery make a year?

In 2017 Americans spent $73.5 billion on lottery tickets. That’s about $230 per year for every person in the country, which is an increase from the previous year. The total increases to $80 billion when electronic lottery games are counted.

The state with the highest lottery revenue was New York, which took in $8,344,023,000 in 2016.

So it’s no surprise that there are only a handful of states and territories without lotteries, because the lottery is a big benefit to state budgets. It’s an attractive way to raise money without raising taxes.

Lotteries are accepted by the public where they have been introduced as long as they contribute towards the common good, such as education programs and college scholarships.

Lottery proponents argue that states like Alabama lose a lot of money from residents who cross the border into neighboring states to buy lottery tickets.

Lottery retailers near the border in states like Florida or Louisiana do a roaring trade, especially when there’s a big Powerball or Mega Millions jackpot.

The argument that the money could be spent locally instead and benefit good causes in-state is persuasive to many residents.

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[edit]

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[edit]

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 44 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[edit]

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]

United States Lottery Post

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[edit]

United States Lottery Post

Among the states that do not have lotteries, Alabama and Utah cite religious objections.^[12]Nevada's lucrative 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. GovernorPhil 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]

New technologies[edit]

United States Lottery Visa Application

In recent years, new applications such as Lottery.com and Jackpocket were created for people to purchase lotteries over their smartphones.^[16]

U.S. lotteries[edit]

Key

2by2 = 2by2
C4L = Cash4Life
LA = Lotto America
LFL = Lucky for Life
TSM = Tri-State Megabucks consortium
0 = only multi-jurisdictional games are Mega Millions and/or Powerball

Other joint U.S. lotteries[edit]

These games also are offered by multiple lotteries.^[17] Some of these games feature a shared progressive jackpot (noted by °):

• 2by2 (3 lotteries): Kansas, Nebraska, North Dakota
• Cash4Life (9): Florida, Georgia, Indiana, Maryland, New Jersey, New York, Pennsylvania, Tennessee, Virginia
• Lotto America° (13): Delaware, Idaho, Iowa, Kansas, Maine, Minnesota, Montana, New Mexico, North Dakota, Oklahoma, South Dakota, Tennessee, West Virginia
• Lucky for Life (26): Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Idaho, Iowa, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Vermont, Wyoming
• Tri-State Lottery (Megabucks Plus°, Pick 3 (Day & Night), Pick 4 (Day & Night), Fast Play°): Maine, New Hampshire, Vermont

See also[edit]

References[edit]

1. ^Horton, Alex (October 18, 2018). 'How Mega Millions and Powerball changed the odds to create monster jackpots'. The Washington Post. Retrieved October 19, 2018.
2. ^Millikan, Neal (2011). Lotteries in Colonial America. Routledge. p. 2. ISBN9781136674464.
3. ^ ^abcdefghijkRoger Dunstan (January 1997). 'History of Gambling in the United States'. Archived from the original on September 10, 2010.
4. ^McMaster, John Bach (1911). A History of the People of the United States: From the Revolution to the Civil War. Appleton and Company. p. 588.
5. ^ ^abcSzymanski, Ann-Marie E. (2003). Pathways to Prohibition: Radicals, Moderates, and Social Movement Outcomes. Duke University Press. pp. 95–96. ISBN978-0-8223-3169-8.
6. ^John Houston Merrill; Charles Frederic Williams; Thomas Johnson Michie; David Shephard Garland (1890). The American and English Encyclopædia of Law: Least to Mail. Edward Thompson Company. p. 1172.
7. ^Jean Edward Smith, John Marshall: Definer Of A Nation, New York: Henry Holt & Company, 1996, pp. 456-459
8. ^'Ley Núm. 74 de 2006 -Ley del Programa de Ayuda a Jugadores Compulsivos de Puerto'. Lexjuris.com. Retrieved July 26, 2012.
9. ^Howard, Morgan. 'Gov. Bryant appoints MS Lottery Corporation board of directors'. wlox.com. Retrieved October 22, 2018.
10. ^'U.S. lotteries and the state taxman'. Reuters. July 15, 2011.
11. ^ ^abcdNGISC (August 3, 1999). 'National Gambling Impact Study Commission Lotteries'.
12. ^ ^ab'Five states that don't have lotteries'. Playport. July 30, 2019. Retrieved November 26, 2019.
13. ^'Knowing Vegas: Why doesn't Nevada have a state lottery?'. Las Vegas Review-Journal. April 11, 2014. Retrieved January 8, 2020.
14. ^'Mississippi lottery bill passes House, headed to governor'. WAPT. Associated Press. Retrieved August 29, 2018.
15. ^Maguire, Sean. 'Governor proposes independent corporation to run an Alaska lottery'. ktuu.com. Retrieved May 26, 2020.
16. ^'Jackpocket App Allows You to Buy Lottery Tickets Using Your Phone'. ABC News. September 29, 2015.
17. ^'Games'. Multi-State Lottery Association. Archived from the original on May 19, 2016. Retrieved May 7, 2016.

Further reading[edit]

• Dasgupta, Anisha S. 'Public Finance and the Fortunes of the Early American Lottery.' QLR 24 (2005): 227+ Online
• Millikan, Neal. Lotteries in Colonial America (2011). excerpt
• Watson, Alan D. 'The Lottery in Early North Carolina.' North Carolina Historical Review 69.4 (1992): 365-387. Online

United States Lottery Tax