What is a Lottery?


A lottery is a game of chance in which winners are selected at random. It is a popular form of gambling, encouraging people to pay a small sum for a chance to win a large prize, often administered by state governments. Lotteries are also a way to distribute money for public goods, such as sports team drafts and the allocation of scarce medical treatment.

The modern era of state lotteries began in 1964 with New Hampshire’s adoption, but subsequent lotteries have followed remarkably similar paths: the states legislate a monopoly; create a public corporation to run it (rather than licensing a private firm for a profit); begin operations with a modest number of relatively simple games; and then, due to ongoing pressure for additional revenue, progressively expand the lottery by adding more and more games. As a result, the public policy considerations that motivated state officials to establish a lottery often are overwhelmed by the ongoing evolution of the lottery’s operation.

The basic components of a lottery are a pooling mechanism, a set of rules that govern the frequency and size of prizes, and a means of recording the identities of bettors and the amounts staked by each. The pooling mechanism is normally accomplished through a hierarchy of sales agents who pass the money paid by each bettor up through the organization until it is “banked,” at which point it can be used to determine winnings. The rules for how the prizes are awarded differ by country, but a common practice is to allow winners the choice between an annuity payment and a one-time payment. In either case, the lump-sum option is generally smaller than the advertised (annuity) jackpot, owing to the time value of money and withholdings for taxes.