Lottery Corollary

Introduction

As some of you may have noticed, I’ve been churning out a bunch of lottery-related content recently, and you guys haven’t seen half of it! In addition to my major statistical study on WoV, which focused on loss per resident rather than revenues, I’ve also written:

1. A statistical page for WorldCasinoDirectory that will be published pretty soon. If you have read my statistical loss/resident report on WizardofOdds, then I have to be honest and say that’s there’s really not any great reason to read this one. It’s the same basic information being presented in a different way, but WCD gets a good deal of lottery traffic.
2. An article here focusing on a lottery game in the State of Wyoming for which the state lost money.
3. Updates for the RealMoneyAction states’ pages that have had basic lottery data included with them.
4. A page for Wizardofodds.com that will analyze the effects that Covid may have had on lottery sales, which will be published shortly.

Other lottery-related articles and pages that I will be writing in the near future will include:

1.) There will be another Wizard of Odds page in December that will complete the study on the impacts of Covid-19 on lottery revenues. The reason this additional page will be necessary is because the page that is about to be published only contains partial data for some of the states studied. Furthermore, a few of the states in the study have not completed the audits, and therefore, have not published any official reports yet on 2020.

2.) I hope to do an analysis on loss per resident in other countries, so that they may be compared to losses per resident in various U.S. States. I would also make a comparison to the United States, as a whole, but that would be a partially incorrect comparison because five states do not have lotteries, and more than that, the specific games offered are left up to the states.

3.) I hope to do interviews with some players who play the lottery with any real frequency to see if they are aware of how poor the lottery returns are and what their motivations for playing are. As far as motivations for playing are concerned, this will focus more on Instant Tickets and Daily Drawing Games players as the motivations for playing games like Powerball and Mega Millions should be considered fairly obvious.

In any event, each of these interviews will be relatively brief, as a result, they will likely be published as one article on here.

4.) While this is not lottery-related, I will shortly be doing a nationwide study on the effects that Covid-19 had on casino revenues for the year 2020. It should be known that this study will only include state licensed and regulated Commercial Casinos. The reason for that is because Tribal Casinos are not necessarily required to publicly report revenues; it just depends on what state in which the Native American casino is located.

In addition to this being done for a WoO Page, chances are that I will be doing alternate versions, containing the same or similar data, for one or more of our other sites.

Therefore, all I can say is, “Stay Tuned!”

THE UPCOMING COVID LOTTERY REPORT

I want to encourage everyone to read the upcoming report that compares Fiscal Year (or actual year) 2020 Lottery revenue data to Fiscal Year 2019 lottery data to see what the effects of Covid might have been. This particular study required a ton of research and time, so I can honestly say that I am pretty happy with it.

Briefly, findings in my report will include:

1.) Instant Ticket Sales Went Up Almost Across the Board

-I will get into more details as to what caused this, but Instant Ticket sales basically just continued their trend of rising year-over year. There are a number of reasons for this to be the case, which include:

A.) Available denominations for Instant Tickets have been increasing over the years, with most states (assuming they offer Instant Tickets at all) having individual ticket prices of $20, or more. Some states even have $30 and $50 price points for individual tickets.

While the percentage return to player on these ticket types might be higher, (please see my, “The Lottery Sucks,” Wizard of Odds page and look at the state of Maine to get an idea), these types of tickets simultaneously have a greater expected loss per ticket purchased. Simply put, 25% of $25 is much more than 40% of $1.

Currently, the Texas Lottery (to name one) offers Instant Tickets as high as the $50 price point, but they are currently considering introducing a new Instant Ticket type that will be priced at $100. We can only hope that people will actually bother to look at the game rather than just scratching off the barcode and scanning to see if it wins!*

*Also, even if the ticket looks like a loser, I would hope that they would scan it anyway, just in case! Could you imagine throwing a winner into the garbage on a ticket that you paid $100 for?

B.) In general, Instant Tickets have also had an increasing variety of themes and cross-licensing of popular brands and fads. Examples include increasing amounts of Monopoly-branded tickets, Slingo tickets and Plants v. Zombies tickets, to name a few.

C.) Instant Tickets are frequently purchased for birthday cards, Christmas cards, wedding gifts and Christmas stocking stuffers. As anyone who knows about gambling is aware, store gift cards would provide a much better value relative to the price than do lottery tickets, but that doesn’t change the fact that Instant Tickets make popular gifts.

In fairness, I guess there is something to be said for giving someone a $5 gift that could, though the probability is low, be worth as much as $10,000 to them.

D.) I have found that, while the sales increases to Instant Tickets for 2020 were basically Universal, drawing ticket sales declined almost across the board, which we will discuss shortly.

The main reasons for the decline are a lack of Mega Millions and PowerBall ticket sales compared to previous years. GIven that some folks can be presumed to have a, “Lottery budget,” my assumption is that some people who would normally buy Powerball or Mega Millions tickets when the jackpot amounts are high enough for their liking instead spent some of that money on Instant Tickets.

That’s not going to be the case everywhere, but at least for some people, this lottery spending budget simply moved from one ticket type to the other due to the absence of high jackpots.

E.) Finally, I found that the states with less strict lockdown measures generally experienced even greater increases to Instant Ticket sales than did those states with less strict measures, or in the case of South Dakota, no measures whatsoever.

In fact, of the states that I glanced at, South Dakota was the ONLY state that experienced an increase in Video Lottery Terminal (VLT) revenue year over year comparing 2020 to 2019.

Anyway, states that weren’t quite as strict and did not shut down businesses completely as long would generally experience Instant Ticket sales gains of 10%, or more, with a few states even seeing increases as high as 25% in sales of this ticket type!

One reason for this is simply because the states with less strict measures did not limit their residents’ opportunities to purchase lottery tickets. For example, in many states, bars and restaurants also double as lottery retailers, or have the self-service lottery ticket kiosks. In effect, when people visit these establishments, it represents another opportunity for them to purchase lottery tickets. When these establishments are closed, then that represents fewer opportunities for the residents to buy and less exposure to the lottery’s advertising.

Additionally, I found that the states with the longest stay-at-home orders were likely NOT to have seen increased Instant Ticket sales revenues to as high of an extent. In addition to many lottery retailers being closed completely, these residents were expected to only travel for essential reasons.

What does that have to do with the lottery?

What it has to do with the lottery is that these residents would be using less fuel. Using less fuel leads to stopping at gas stations less frequently. In most states, gas stations are also lottery retailers, so in a roundabout way, these residents were stopping at lottery retailers less frequently and had fewer opportunities to buy (and less exposure to advertising) as a result.

F.) I would assume that some of these additional Instant Ticket purchases came about due to a combination of boredom and having some extra money to spend.

In many states, recreational opportunities were restricted throughout the year in the form of movie theaters, bowling alleys and bars being closed for parts of the year, sometimes long stretches. When that happens, people will tend to seek out other forms of entertainment, which will sometimes include making lottery purchases.

Additionally, stimulus packages that were passed included an extra $600/week in unemployment benefits, for those laid off or furloughed, in addition to what they would have already been receiving in the form of unemployment compensation to begin with.

In some cases, folks who work jobs that would put them in the lower tiers of per capita income were actually better off as a result of being unemployed, at least, temporarily. Effectively, you had some people getting an EXTRA $600/week in unemployment benefits who may not have made $600/week at their jobs to begin with.

Of course, Instant Tickets are not a great use of that money and these folks are mostly just redistributing Federal Government money to State Governments in an indirect and inefficient manner, but at least they’re entertained, I guess.

Furthermore, there was likely a positive effect on lottery Instant Ticket Sales due to the direct stimulus checks, which essentially, went to almost everyone. In many of these cases, the stimulus checks would directly represent discretionary income for many of these folks, which is to say---they didn’t really need the money. With newfound money that they might not actually need for essentials and a lack of entertainment options, it can be assumed that some people found their way to the scratchers.

FOR THE FUTURE:

It’s difficult to say whether or not these increases to Instant Ticket sales will hold, because we don’t know how much of these sales were essentially artificial and came about by way of these temporary forms of discretionary income.

Unfortunately, it will be a while before we can say for sure and will come about late next year (or early 2022) when we have the ability to compare the 2021 Fiscal Year for state lotteries, as far as Instant Ticket sales are concerned, to the 2020 Fiscal Year.

2.) Drawing Ticket Sales Declined Substantially:

Drawing ticket sales did not fare as well during the Covid-19 pandemic, which leaves us with kind of a chicken and the egg question.

When it comes to Drawing Ticket sales numbers when comparing the 2020 Fiscal Year for various state lotteries to that of 2019, we see that this game type went down across the board. In-state lottery games generally improved slightly, or stayed relatively flat.

The revenue loss leaders for the state lotteries, Universally, were Mega Millions and Powerball games, in fact, one state in particular only sold approximately one-third of the Mega Millions tickets that they had the year prior.

The root cause of the sales slump was the fact that neither of the two lotteries had any eye-popping jackpot amounts in 2020 compared to previous years. That’s undeniable. The question is whether or not this resulted by way of Drawing Ticket Sales that would have been decreased anyway, or whether there were fewer early (and low jackpot ticket buyers), “Priming the pump,” so to speak.

Here is a summary of my findings:

A.) Multi-State Lotteries are essentially one massive state lottery.

The way that games such as Powerball and Mega Millions work is that the Grand Prizes are largely player-funded, which is to say that a percentage of the losing tickets boost up the jackpot, as they would with any progressive game. A fraction of all monies bet into the Progressive game get added to the Porgressive provided that the jackpot does not hit.

Therefore, if any lack of sales came about by way of Covid lockdowns, business restrictions (some lottery retailers being closed) or stay-at-home orders, then this effect would be seen in the sales (and slowly increasing jackpots) in even those states that are multi-state lottery participants that were not as strict in terms of Covid measures.

It’s a cold on an island. When one person on the island catches a cold, everyone gets it.

Therefore, in the early days of Covid-19, some of the drawing ticket sales for the massive jackpot games might have remained relatively consistent in those states that did not have full-scale shutdowns. Indeed, the states that did not have shutdowns did not, generally, experience as much of a decline in these game types as did states with the shutdowns.

However, it can be assumed that even individual denizens of these states would grow tired of constantly buying tickets that would end up losing and not seeing the jackpots grow at their normal pace. As a result, they would eventually stop buying tickets for these games altogether, or at the very least, buy fewer of them.

The snowball effect eventually leads to the jackpots continuing to grow relatively slowly, which leads to more people not buying tickets and many individuals not seeing a number that would trigger them into buying tickets in the first place.

In short, decreased sales in one (or more) states for these PowerBall and Mega Millions games eventually lead into decreased sales in all of the states. These lottery games probably could have done even worse, except there are many people who just get them for every drawing as a matter of pure habit without any concern for the top jackpot amounts. Some of those people continued to buy.

Although, some of those people did not buy and either stopped participating in state lotteries altogether, or instead, drifted over to the purchase of Instant Tickets as we discussed above. It’s difficult to say whether or not they will ever get back to purchasing Powerball and Mega Millions (on an individual basis, certainly some will not) and will probably only have a renewed interest in those games when the jackpots hit a ridiculous number again.

The habit of purchasing tickets for these games having been broken for some of these people, it’s hard to say whether or not Mega Millions and Powerball will ever see record annual sales numbers again. This is going to be a pretty tough hill for those lottery types to climb.

B.) Poorly Timed Jackpots:

Another detrimental effect had on the PowerBall and Mega Millions games is that there were some poorly timed jackpots in relation to the Covid-19 stay-at-home orders.

Specifically, a PowerBall Grand Prize was hit both in January of 2020 as well as February of 2020, which reduced the top prize for that lottery game to its base level. That decreases the interest in buying Powerball tickets by itself, but after that, it got compounded by the fact that the many of the states instituted stay-at-home orders that would limit the opportunities for some people to participate in lottery games.

For an illustration, we can take a look at the Powerball jackpot tracker here.

As we can see, beginning in February, the PowerBall jackpot would only increase by its base of ten million dollars for several drawings, and then, the Grand Prize was hit in April.

Out of panic, the PowerBall would announce a reduction to the base (and PowerBall lottery funded) jackpot to twenty million dollars.

On top of that, PowerBall would announce that the minimum increases to the jackpots would go from ten million dollars to a mere two million dollars, a decrease of 80% to the guaranteed additional amounts for drawings during which the Grand Prize is not hit.

Unsurprisingly, the PowerBall managed to seriously shoot itself in the foot with this decision, as many players would respond by simply not playing the games. For the jackpot to not only start at twenty million (the base had been forty million, so this was a 50% decrease) but also not increase by the guaranteed ten million resulted in lower jackpots, for many consecutive drawings, than Powerball players had seen in years.

While the PowerBall was acting out of some misguided sense of self-preservation (even though it was never in any real trouble) they managed to make things worse for themselves by these actions. It just goes to demonstrate, even lottery players will only put up with so much.

It would take five non Grand Prize drawings for the PowerBall to eclipse the forty million dollars that used to be its starting figure. In effect, the sixth PowerBall game after this decision, which would have had a jackpot of ninety million dollars under the old rules, had a top jackpot of a comparatively paltry 43 million dollars.

Even then, the PowerBall would not see jackpot increases of ten million dollars, or more, until late May...and then the grand prize was hit again.

June 3rd, 2020, would represent only the third consecutive drawing, since the beginning of April, for which the top jackpot increased by at least ten million dollars. There would be a grand prize winner for this drawing, so back to twenty million we go.

This jackpot hitting was disastrous for the lottery, because now it had to start all over at twenty million dollars again.

For those of you who think PowerBall is rigged, maybe they’ll rig the damn thing one day, but I’m going to say, “Not yet, anyway.” Jackpots hitting on low grand prize amounts are a total disaster for the PowerBall. They WANT jackpots NOT to hit, that way the grand prize amount increases exponentially from base and more people are compelled to buy tickets.

When that happens, Powerball holds more than 50% of all monies bet.

It would take another seven drawings (another grand prize, this time 22M, had been hit two drawings later) for the PowerBall top jackpot to again exceed the forty million dollars at which it used to start. People simply weren’t buying tickets anymore and Powerball, finally, had gone too far in ripping people off for the liking, seemingly, of many of the players.

Sadly, PowerBall ripped off the very players that it needs to keep playing in order for the game to work in the first place---the people who are willing to buy tickets when the jackpots are extremely low. When it went from forty million to twenty million dollars to start, with paltry guaranteed increases, some of the habitual early players simply said, “This is too much.”

Increases to the PowerBall jackpot would not reach ten million dollars again until after the July 15th Drawing, and even then, they weren’t consistently that high. For the next several drawings with no Grand Prize winner, the jackpot would increase anywhere from nine to eleven million dollars.

It was only after the July 29th Drawing that the grand prize would increase by at least ten million dollars with every subsequent drawing that did not have a top prize winner. And, it didn’t take long for someone to hit it again.

On August 12th, 2020, the grand prize of a relatively small 169M dollars was won. Had the PowerBall started at forty million, as it had before, and went up with every failed drawing by the previously guaranteed ten million dollars, this jackpot would have been 210 million dollars. That’s even ignoring player contributions to the jackpot, it’s based just on the minimum guaranteed increases.

However, we can roughly determine what the jackpot would have been by summing all increases over the new guaranteed increase of two million dollars. The player-funded part, as it was, totaled 116 million dollars, so therefore, the top jackpot for the drawing in question would have been more like 326M dollars as compared to the 169M dollars that it was. That even ignores the fact that sales would have increased as the top jackpot crossed key numbers of 200M, 250M and 300M dollars.

The top jackpot would not be hit again in the year 2020 and would continue to increase very slowly relative to previous years.

Mega Millions also experienced an unfortunate top jackpot hit, not that they could have known it, on February 11th, 2020. This would return the jackpot to its base amount just weeks before the stay-at-home orders. What you are left with is people experiencing economic uncertainty AND a lower than average jackpot number for this lottery game.

Mega Millions would similarly decide to try to fleece its players, by first reducing the starting jackpot from 40 million to 20 million dollars, and then, in a brazen move, not guaranteeing ANY minimum to the jackpot increase:

Simply incredible.

While PowerBall would at least leave a guaranteed minimum of two million dollars in increases in place, (despite the fact that this was still an 80% decrease to the previous guarantee) Mega Millions was brazen enough to guarantee its players nothing. Similar to Powerball, they also reduced the starting jackpot to twenty million dollars.

Guess which of the two games did worse?

The moral of the story is that there’s simply a point at which people, even lottery players, WILL ABSOLUTELY NOT TAKE ANYMORE OF YOUR BULL****!!!! You can only push people so far.

Former Mega Millions players would respond as the lottery would, almost Universally, perform even worse than Powerball did with sales decreases of nearly 50% across-the-board, and in the case of one state, Mega Millions barely managed to scrape together a third of revenue for FY20 compared to FY19.

Good. Better that it would have been absolutely nothing.

Previously, Mega Millions’ guaranteed increases to the top prize were only five million anyway, so while two million would have been terrible, it wouldn’t have been as much of a percentage decrease as PowerBall was.

And...let’s not forget that the game has an effective House Edge in excess of 50% anyway. What the hell else do you need? If the game can’t do as well as expected on 50% of all dollars spent, then there simply should not be a game.

WE GUARANTEE YOU NOTHING.

Perhaps the worst aspect of this announcement was the fact that, despite the decreased sales, the Mega Millions Jackpot never failed to increase by at least two million dollars that year anyway!!! Can you believe it? They could have announced a decrease in the guaranteed jackpot from five million to two million dollars, saved a little face with the public and nothing would have changed on the financial side.

Anyway, Mega Millions had a MUCH worse year than did Powerball, but I guess that’s what happens when you directly tell people that you don’t care about the entire crux of your game, which is to generate huge jackpots that are partially game funded, but mostly, player funded. We will give you nothing.

Screw them. They got what they deserve. I wish it would have been worse.

FOR THE FUTURE:

We can only hope that the players who would habitually play these Mega Millions and Powerball games at low numbers, and who are responsible for generating the jackpots that get other potential players interested and have temporarily abandoned those games decide to permanently abandon them.

If there’s one thing that they should take away from this, it’s that the lotteries do not care to offer them a decent game. Hell, they don’t even care to offer a game that is merely bad. They will stop at nothing and push the envelope as far as the early jackpot buyers will allow them to get away with.

At some point, the decision will have to be made whether or not they want to improve upon the minimum jackpots as well as the guaranteed increases, but the public should know, when things look the least little bit negative for those lottery games...that those lotteries will not hesitate to make things so much worse for their most loyal players.

Compare:

Imagine that you own a casino and your best Video Poker game is 9/6 Jacks or Better. Imagine further that you do not offer any comps for playing this machine and you only have one machine of this nature in the entire casino at the $5 denomination.

Another thing that our make-believe casino will have is a very loyal player who plays optimally, but still, plays these $25 hands at a rate of approximately 800 hands per hour and puts in 20 hours a week.

25 * 800 * 20 * .0046 = $1,840

In other words, the casino is raking in an expected $1,840 in expected losses, per week, just from that one guy!!! That’s ignoring anyone else who might happen to play the machine when he is not there. That’s ignoring players who might occasionally play this game in a sub-optimal way. It’s ignoring the players who might play the lower-returning games on the machine.

$95,680 in expected casino win, annually, just off of that one player.

Imagine that casino revenues are down slightly compared to the previous year, perhaps due to the Covid-19 pandemic so the casino hires an absolute idiot for a slot director who looks at that machine and asks, “Why are we offering a ninety-nine and a half percent game?”

The low-level slot attendant might respond, “Well, Mr. Idiot, it just so happens that we have one player who plays it for an average of twenty hours per week. In fact, he only gets minimal RFB, so we’re making a killing off of him.”

The idiot slot director might respond, “It doesn’t matter. Nobody around us offers Video Poker this good. I want you to change this machine to 8/5 Jacks or Better immediately.”

Well, the slot attendant does his job. Naturally, the player returns and he is not happy:

The player summons a slot attendant and says, “Hey, excuse me. Yes, I’m sorry. I think they changed the game that I like on this machine. Full Houses are supposed to pay $225 and flushes are supposed to be $150, but both are lower.”

The slot attendant tries to figure it out, but eventually, gives up and gets a casino host to talk to the guy.

The host says, “Hey, yeah they changed that game. It’s the new slot director; he’s kind of an idiot. Anyway, there’s nothing I can do about that, but as you see, you can have your play tracked now and you’ll get free play offers. At your playing level, I can probably set you up with some offers that are just for you and start getting you into better suites.”

The player might respond, “I don’t want free play or better suites. I just want the video poker game I like back.”

The host talks to the slot director and the slot director says, “Go blow yourself. That loser will play anyway.”

The guy is told that the machine will not be changed back and walks out of the casino never to return. Hopefully, he at least got the best one-time free play he could get from the host and played that off first.

This example summarizes exactly what the Mega Millions and Powerball lottery did to their most loyal players who seed the starting jackpots and, directly or indirectly, are responsible for a huge percentage of the revenues on those games. The only difference is that these lottery games were not offering 9/6 Jacks or Better, they were offering games where the sheep were getting slaughtered to the tune of 50% to begin with.

“FREQUENTLY” ASKED QUESTIONS

Just for the record, I don't really get asked any questions about my writing frequently, but some writers like to pretend they do. I’m not exactly going to create the illusion that my various Inboxes are flooded with hundreds of questions, every day, about what I am doing.

The truth is, if I get asked twenty questions in a week across various social channels (E-Mail, PM’s, Facebook Direct Messages), then I consider that a pretty good week. Feel free to ask me any question you want across these various channels. I promise that I will not be annoyed. Usually, I’ll be slightly enthused by the fact that I’m getting more questions than usual to begin with, and then when I see one I haven’t been asked before, I’ll say, “Oh, neat!”

That said, I have been asked more than zero questions about my lottery studies by people who I do not know personally. Furthermore, and contrary to what some folks might believe (given my personality) I do have friends and family who will occasionally ask questions about what I am doing.

Therefore, I present this section of, “Frequently Asked Questions,” which is just to say, “Questions That I Have Been Asked at Least Once.”

(I’m such a good self-promoter!)

Question: Why are you studying the lotteries so deeply?

Answer: The truth of it is that there are many lottery-related searches on Google and little in the way of detailed lottery information outside of the lottery websites themselves.

My goal is simply to get Google clicks and create another category for which our family of websites will score highly on Google rankings. It is for that reason that I have been compiling and analyzing as much lottery information as possible.

Furthermore, there are many people who play the lottery. Millions and millions and millions of people spend more than a trillion dollars on lottery games every single year. I can’t even fathom a guess as to how many individuals purchased or played at least one lottery ticket last year.

Therefore, if we can get just a tiny fraction of those eyes on our sites, it will be great for viewer traffic. More than that, they might even develop an interest in casino games that have a much better return.

Question: Will most of your writings be lottery-related from now on?

Answer: No. Although, they will be for about the next month. I’m going to complete this current cycle of lottery studies over the next month, and then basically go back to ignoring the lottery completely until December.

In December, I will be able to publish another page that completes the study on how the lottery did both before and after Covid.

I will then go back to blissfully ignoring the lottery for about another year. Finally, when all of the Fiscal Year Annual Reports for 2021 are released (roughly mid 2022) I will then do another study that lists all states and looks at lottery losses on a per resident basis.

In addition to that study, I will also see how the 2021 Fiscal Year numbers compare to those of 2019, which I think is a better comparison because any effects from Covid-19, in terms of sales in individual states, will have effectively been eliminated comparing those two years.

Question: Will LCB ever create a lottery site?

Answer: I have no idea, but I would write articles for it, if they did.

Ownership of these sites has NEVER asked me to moderate my opinions in any way, shape or form, so I would expect that not to change. As a result, even if they did create a site strictly focused on the United States lottery, I imagine that any articles I would be asked to write would be with them knowing that I have a generally unfavorable opinion of state lotteries and the games that they offer.

Since I would assume that it would be lotteries advertising on those sites, there can be no doubt that the advertisers would not like some of my articles. I might moderate my tone a bit accordingly, but the substance of what I would say would be unchanged.

Question: Would you ever create your own website about lotteries?

Answer: Absolutely not.

For one thing, I don’t even know the basics of what one would do to create a website, so I have no experiential basis to even do that.

Secondly, unlike online casinos, lotteries can advertise themselves on major social media networks such as Twitter and Facebook with total impunity. In other words, they would probably not have any desire to even purchase advertising on my little theoretical site, especially not United States state lotteries.

Finally, even in the extremely unlikely event that state lotteries DID want to purchase advertising space on my little theoretical website, I would refuse to sell it to them.

It’s best that I just stay out of the lottery website game. I’d refuse to advertise for the only entities that would even hypothetically want to advertise with me.

Question: Why do you hate lotteries so much?

Answer: How much I hate the state lottery really depends on which state we’re talking about.

Even though the lottery department has no direct control over it, I’m most strongly against state lotteries in states in which other forms of gambling are not legal. In my opinion, none of it makes any sense.

Think about it this way: These states create lotteries because they want lottery transfers to go to the state Government, usually purportedly to fund education and healthcare, but some of those same states will not legalize and regulate other forms of gambling that universally have much higher returns to player and are enjoyed by more people.

Even the state lotteries themselves are against gambling expansion, in some cases, though that’s somewhat understandable. They don’t want any declines or competition, real or perceived, with traditional lottery revenues. They see other forms of gambling as a threat, which could harm the scope of their lottery department as traditional lottery sales will either declined, or be argued not to increase as much as they otherwise might have.

In the meantime, they offer games with terrible returns, and occasionally, with very high dollar amounts per ticket. A 75% return to player on a scratch off ticket that costs $25 is totally ridiculous. The house has an expected profit of $6.25 on a ticket that theoretically can take only seconds to play and costs comparatively nothing to produce. There’s absolutely no value in that for the players, other than some absurd long shot chance of hitting for a hundred grand, or whatever.

Players would actually have a better chance of turning $25 into $100,000 just by finding the highest Table Maximum they could and simply reverse martingaling the Pass Line. There are probably better methods than that, but that would be the simplest way.

Also, too many prizes are in the form of, “Free,” tickets. The tickets aren’t free. You just paid the $25 to scratch two tickets off instead of one. It’s like, “Free Games,” on slot machines in that they are a total misnomer. You pay for the initial spin, so there’s no such thing as a, “Free Game,” they’re all a part of the overall return of the game.

If you can’t get a, “Free Ticket,” without paying for a ticket in the first place, then the ticket is not free. Much better than a ticket just award its face value in cash, then you’d at least have the option of not buying another one. Some tickets do that.

Anyway, I hate everything about state lotteries in states that do not have legalized and regulated Commercial and Online casinos. Rather than the State Governments getting a percentage of the revenues from better returning forms of gambling (which, in effect, are really just a percentage of the house edge) the Government is simply choosing to offer worse-returning games directly. Nevada is pretty awesome for not having a state lottery, though I could forgive them for getting into PowerBall and Mega Millions if they ever decide to do that.

Anyway, the more restrictive a state is about other forms of gambling, the more I hate state lotteries. It’s totally hypocritical. You either want the Government to earn revenues from its citizens gambling, or you don’t.

When you have a State like West Virginia, which has five Commercial Casinos, Limited Video Lottery Terminal (VLT) locations, Instant Tickets, Drawing Tickets, sports betting, online casinos, charitable bingo, raffles and pull tabs as well as probably some obscure stuff that I can’t even think of right now---I tend not to mind the State Lottery so much. Still, nobody should ever play the traditional lottery games. They’re terrible.

However, when you compare it to a state like Texas that does not have any gambling other than lottery, pari-mutuel race wagering (and still with live greyhound racing, at that) and tightly restricted charitable gambling operations, that’s when the State Lottery pisses me off. Not only do the games return terribly, residents who really want to gamble don’t really have any in-state options. Texas is even doing everything they can to stop a small tribal casino from having a handful of Class II Electronic Bingo games. It’s totally ridiculous.

Question: How would you change state lotteries?

First of all, I wouldn’t change anything about Powerball and Mega Millions other than putting starting jackpots and guaranteed jackpot increases back where they were. Player-funded ridiculously huge progressive jackpots are the name of the game, and due to the high variance nature, those games should have a high house edge.

That’s basically just a larger version of what some slot machines in casinos do. The more ridiculous an amount the top jackpot is relative to the amount bet, the less return to player you’re going to tend to see on the base game.

So, in my opinion, if you put those numbers back to what they were, those games would be stupid to play, especially at low jackpots, but basically acceptable for what they are.

I don’t like the idea of slaughtering most of the players to the tune of 50%, but it’s kind of necessary if I am going to guarantee a minimum jackpot of forty million dollars simultaneously with the goal of never having a losing year. If a situation arises in which you can’t make that happen on a 50% hold, then you should just get rid of the game completely.

Secondly, I would change in-state drawing games to have a return-to-player of no less than 80% provided the top jackpot for the game is $5,000, or less. I’m basically talking about Daily Pick type games with this one. I think that if I could find a way for players to win more frequently and decrease the House Edge, then more people would play and the games might actually make more in profits overall. How many drawings can a person completely lose in a row before they just stop playing altogether?

I’d probably do something where your next ticket is free if you just match the first number, but the highest pays are the only ones that apply, so if you have some other winner, you’d get that cash and not a free ticket.

If you look at video poker, many casinos offer Video Poker games with a Top Prize of $1,000 on a game for which you bet $1.25 that sometimes returns in excess of 98%. I also imagine that those machines cost more to operate, so if they can do that, then lottery drawing games with relatively low top prizes could certainly be profitable on a 20% hold.

Thirdly, I would change the in-state drawing games with higher than 5000:1 top prizes to have a minimum return to player of at least 70%. The way that I would do that is probably operate similarly to PowerBall and Mega Millions in that there would be a player-funded progressive increase when the top prize is not hit. The base returns (without the contributions) would be roughly the same.

I think that would not only generate interest in the game, but on occasion (rare) actually give the players the opportunity to get in at positive expected value (not considering taxes and due to other players’ contributions) and the lottery would make a ton of money on those because the base game still doesn’t pay well. I tend to think that would generate a lot of sales.

Finally, ALL Instant Tickets would have a return-to-player in the range of 75-95%, mostly based on ticket cost. Holding more than a quarter out of every dollar is ridiculous, so I at least want to be competing with the worst slot machines that are legally permitted anywhere.

The one thing that I would not have is a prize tracker that the public has access to and top prize winners would be asked to sign an NDA, excluding immediate family, of course. I wouldn’t want the public to know when some of the top prizes for a particular Instant Ticket game have already been sold. Some lotteries already don’t disclose that information in real time.

Anyway, if you’re coming in and buying a $50 piece of laminated scratchy paper, then you should expect, I would hope, to get an expected return of at least $45 (10% house edge) of that money back. If there’s no way to make that work, then just don’t sell $50 pieces of paper.

Question: Don’t you consider that the lottery funds education?

Answer: I’ve looked into states that do not have a state lottery and all of them seem to have public schools. In other words, lotteries are not necessary for the funding of education.

More importantly, the funding of education is just the company line. Without the lottery, states would not stop funding education; they would simply cut funds from elsewhere in the event that there was no way to replace the lottery transfer revenues. I can think of many things that need to go before education, starting with salaries for state representatives and officials.

The whole premise of the thing is that some of the educational funding comes from the lottery, but really all that does is free up other state revenues to do other things. You’d have education either way. If the state is going to be directly administering a form of gambling, often with a house edge greater than 50%, depending on the game type, then you need a nice heart-warming word like, “Education,” associated with it to make it more palatable to folks.

It’s not as if there was no public schools before the state lottery started.

Certain lottery revenues are required to go to education, and in theory, other education spending at the state Government level would have remained the same or increased anyway, but even that hasn’t always happened. At least, not in every state.

Question: Do you play any lottery games?

Answer: Haha. No. Not unless you count Video Lottery Terminals (VLT’s) which are directly operated by some other business who just operate with state lotteries on a revenue-sharing agreement, which is really just a tax on revenues that is called something else. It’s no different than a casino tax.

In any event, I do not participate in any traditional lottery games whatsoever. The last time I did was three years ago because a casino was giving out free $10 state lottery tickets on a particular day in addition to the free play offer, so it’s not like I was going to refuse it.

I’ve technically purchased some Powerball tickets since then when the jackpots were high, but it was never with my own money. It was either because I offered to go (would have been going to the store anyway) in exchange for a free small piece of the action, or because I was being reimbursed anyway.

Question: Don’t you play when the jackpot gets high enough?

Answer: Hell no. The probability of my actually winning is almost zero and there’s no pragmatic difference to me between winning twenty million dollars and winning a half billion. It really wouldn’t make a difference or change my plans in any way. Therefore, if I was going to buy huge jackpot drawing tickets; I’d either always buy them or never buy them.

Obviously, I choose to never buy them.

Question: Can you get ahead on the lottery?

Answer: Yes, and I AM ahead on the lottery. When people leave losing tickets laying around in stores, I always take a quick peek to see if they accidentally littered a winner. I’ve found a few winners. Most of them are for under $10, or sometimes for a, ‘Free Ticket,’ which actually was free, in my case.

I’ll also sometimes glance at littered tickets on the ground. I actually found a $100 winner on the ground when I was a kid. Unfortunately, I needed my mom to actually cash it and she made me split it with her. Damn it. Oh well, $50 is still really good when you’re twelve years old...I’d have to mow several lawns to get to fifty dollars.

I’ll still glance at them if they are on the ground face-up, but I won’t actually touch them unless I can see that they are definitely winners. It’s a bit embarrassing, but I’m a nail-biter, so my hands are frequently in my mouth...for that reason, I can be kind of finicky about keeping them clean.

Also, online lotteries will occasionally offer bonuses that are slightly +EV, even though the individual game returns themselves are terrible. There was only one that was actually good enough for me to do, but I technically did that. I ended up losing a little on that one, but my expected profits were about fifty dollars.

Question: How often do you plan to update your lottery studies?

Answer: I hope the sites continue to like my writing well enough to keep my snarky butt around, but assuming that they do, probably about every two years. The next set of massive studies should come out around 2022, but that’s because the most recent massive lottery study was based on 2019 Fiscal Year numbers and the 2022 one will be based on 2021.

After that, the 2024 studies, assuming I am still around, will be based on the 2013 Fiscal Year.

Question: Why did you use, “Loss per resident,” and did you create that?

Answer: As far as I know, it’s a metric that I created.

The Wizard of Odds site is all about the math, educating people and hopefully causing people to become better gamblers, and play better games optimally, if they are going to play at all.

In keeping with the spirit and intended purpose of the site, I created the, “Loss per resident,” metric because I think it’s more impactful than looking at revenues.

When you see something that says, “The average resident of this state spent $230 on the lottery last year,” that doesn’t really say anything about how much the lottery actually gained from them. Most lottery ticket buyers probably do not keep track of their individual results, especially not the casual ones, though I imagine that a few do.

The loss per resident metric I created might say, “Including every man, woman and child, each resident of the state LOST $100 to traditional forms of lottery (Drawing and Instant Tickets) this year,” which I think is saying something.

Even if we buy the company line that lottery revenues contribute funds to education that the schools would otherwise have to do without, I’d rather just donate $50 to a local school and keep the other $50 for myself with 0% variance.

Question: Do you consider lotteries bad overall?

Answer: Not exactly.

I consider lotteries hypocritical in states in which not all forms of gambling are legalized and regulated. The number sometimes bear out that many residents spend on the lottery simply due to lacking other ways to gamble.

Of course, that particular metric is only part of a broader cause when it comes to individual states. Not having competing in-state forms of gambling certainly helps traditional lotteries, but there only seems to be minimal crossover when it comes to lottery players who engage in other types of gambling.

The two most predictive metrics that I have uncovered are median household income and population density.

Median Household Income matters because the stereotype that most lottery players are destitute folks parting with their bottom dollar in order to hopefully get a way out of poverty is largely untrue. People who are hooked on drugs, of one kind or another, aside...most of these people are too busy buying food and clothes with their bottom dollars. They don’t tend to be huge lottery players.

The California State Lottery Annual Report, at least for 2019, did a study of the demographics of lottery players. What that study found is that lottery players most often tend to be of middle to middle-high level income. For the most part, lottery sales are based on folks with a few extra dollars that they want to waste on the lottery as opposed to some better returning form of gambling.

The second metric, perhaps as important as median household income, is population density. As simple as it sounds, individuals in states that are densely populated, or at least that have densely populated areas, are generally more convenient to lottery retailers. If you live in or near a major city, you probably pass by several lottery retailers every day and are constantly bombarded by signage, billboards and other forms of advertising. Many state lotteries even purchase TV ad time in major markets.

Anyway, these two metrics kind of work together to a large extent, so it can be difficult to say that one works in the traditional lottery’s favor more than the other. States with the highest population density are frequently on the higher end of median household income; there are only a few exceptions.

If you want to check out the soon to be published study on World Casino Directory, I take a deeper look at how all of this interacts with the other in-state forms of gambling...which is a distant third as far as predictive metrics go.

Question: Do you know anyone who works for the lottery?

Answer: Nah. They have to go and sleep in the cellar at the lottery building at the end of the work day.

Question: Why do some states not have a lottery?

Answer: These are just my best guesses, but Alaska has the lowest population density of any state in the country, so I would tend to believe that the lottery would not expect to perform well there. More than that, if big winners could not be submitted remotely, then getting to the state’s lottery department to turn in your claim form could be a nightmare.

I also think that the distribution of physical instant tickets might be a nightmare in many parts of the state. They might want to get in on Mega Millions and Powerball, so they could always do what a State like Wyoming, which has the second lowest population density, does and only participate and offer drawing type games. I imagine that’s the case in Wyoming for basically the same reason. Logistical headache and not enough people convenient to lottery retailers.

Hawaii is an example of a state in which almost all forms of gambling are expressly illegal. Though the islands are more densely populated; (largely due to not having much land area) I could see logistical problems similar to Alaska when it comes to the distribution of Instant Tickets. Additionally, if you had to physically turn in a claim form for certain winnings, it could be a pain in the ass to get to the main lottery office unless they scattered some satellite locations about.

However, Hawaii has bandied about the idea of starting a state lottery, but it hasn’t gone very far yet.

Alabama is another state that has been mostly against most forms of gambling, which I assume largely has to do with religious reasons, at least, historically. That being said, a bill that would start a State Lottery Commissions has passed the Senate and must go to the House just this year (2021). While that bill would not actually start a lottery, or casinos, it would create a state Amendment by which the public would have the opportunity to vote on the matter.

If it actually makes it to a public vote, my guess would be that the vote would be in favor.

In Utah, the Mormons run everything and every form of gambling that you can name is completely illegal. They actually went so far as to create a separate law, when the internet started to really boom, to specifically specify that online gambling is illegal in the state. The funny thing about that is that the language of the laws that they already had would have been sufficient to make it illegal anyway.

Nevada clearly has no need for a lottery. I’d also like to think the state would be embarrassed to offer any games with such poor returns.

Question: Do you support the iLottery or Online Lottery games?

Answer: I don’t have a problem with them in states that also have regulated online casinos.

Question: Would lotteries actually make more money if the games had a better return to player?

Answer: I actually believe so. Instant Ticket revenues tend to clearly be much higher when the games offer at least an average return when compared to those games in other states. I think the overall average is about 70% give or take anywhere up to 3%. Probably 70% is on the high end of the possible range, but I do think it’s at least 67%, or more.

Anyway, residents of states with worse average Instant Ticket returns spend far less money on them, on a per resident basis and those states tend to do less in loss per resident. I think creating the perception of a more fair game might reap rewards.

On the other hand, I don’t know if Powerball and Mega Millions will ever make a full comeback, and we will have to wait a couple years to know, so maybe the damage is done.

CONCLUSION

I can legitimately say that I have been studying the lottery exhaustively and am still not quite ready to take a hiatus of several months. I hope that everyone has checked out my published works so far and has learned something from them. I hope that everyone will check out my future published works on the subject because, believe it or not, a lot of work goes into these.

If you have any questions about state lotteries, please feel free to send them my way!