Mission146
Mission146
Joined: May 15, 2012
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MrCasinoGames
May 7th, 2021 at 8:00:43 AM permalink
Greetings!

This was a massive project that I did for WizardofOdds that has just gone up if anyone wants to take a look:

https://wizardofodds.com/online-gambling/articles/the-lottery-sucks

How bad are traditional forms of lottery (Instant tickets and Drawing games) in terms of return to player? How much do the residents of your state, on average, lose to traditional lottery in a year?

These and other questions will be answered on the WizardofOdds page, "The Lottery Sucks," in which I analyzed the game returns and losses per resident in every state that has a lottery.

By the way, do you know five states do not have a lottery? Try to write down which five you think they are before reading the page and see how many you get right!

Anyway, this took forever because I researched the Annual Lottery Report for each individual state in order to determine the returns on traditional lottery games and indexed those to determine what the loss, per resident (includes children) is to traditional forms of lottery.

For Delaware, in the table on the bottom of the page, I included the Delaware Sports Lottery and also Lottery that includes revenues derived from casinos, separately, just to give people a general idea what the numbers look like for states that have those going through the lottery department. West Virginia, for example, would have one of the greatest losses per resident in the entire country if these things were included, but are below average on loss/resident for traditional lottery revenues because there are more popular (and better returning) legal ways to gamble in the state.

Anyway, feel free to have a look and see how the states compare! Please leave any comments in this thread.

NOTE: I indexed my findings to average loss per resident rather than using lottery revenue per resident because, in my opinion, listing the actual dollar amount loss is more impactful for demonstrating how terrible the lotteries are.

WORST LOTTERY GAMES: Powerball, Mega Millions

BEST RETURN % LOTTERY GAMES: $20+ Instant Tickets (Horrible Expected Loss $$$ Amount, Though)

CHEAPEST GAMES BY EXPECTED LOSS (PER PLAY): $1 Instant Tickets, $1 Keno (Sometimes, and if available), $1 Pull Tabs (If Available)
Vultures can't be choosers.
Mission146
Mission146
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May 7th, 2021 at 8:07:50 AM permalink
I also want to thank the entire LCB Team for making this page look fantastic!

Judging from the E-Mail chain, it seems like half of the people who work for the sites contributed to this one! I have almost zero idea how to do anything on the publishing end, except for the absolute most basic editing, so big props to everyone for all the work on making this page look amazing!
Vultures can't be choosers.
ThatDonGuy
ThatDonGuy
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Mission146
May 7th, 2021 at 8:19:34 AM permalink
I was a little surprised to see California's RTP for drawing tickets was greater than 50%. I am under the impression that all drawing games in California had pari-mutuel payouts with a 50% takeout, including the daily 3-digit and 4-digit ones. (Yes, this includes Powerball and MegaMillions; except for the amount from each ticket contributed to the jackpot pool, bets in California are kept separate from the other states and payouts on non-jackpot tickets in California are pari-mutuel within that state.)
Mission146
Mission146
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May 7th, 2021 at 8:41:52 AM permalink
Quote: ThatDonGuy

I was a little surprised to see California's RTP for drawing tickets was greater than 50%. I am under the impression that all drawing games in California had pari-mutuel payouts with a 50% takeout, including the daily 3-digit and 4-digit ones. (Yes, this includes Powerball and MegaMillions; except for the amount from each ticket contributed to the jackpot pool, bets in California are kept separate from the other states and payouts on non-jackpot tickets in California are pari-mutuel within that state.)



From the California Annual Lottery Report (2019):

https://static.www.calottery.com/-/media/Project/calottery/PWS/PDFs/Financial-Reports-etc/U_103295B-1A_CaliforniaStateLotteryFundStateofCalifornia_CAFR-Final-7_20-Final--v3.pdf?rev=25d733402b604ef09e1212aadf32f99b&hash=A6B9C860D20EF0CBFA7F9B89146BBCD1

Quote:

On April 8, 2010, the Legislature amended the Lottery Act with Assembly Bill (AB) 142. AB 142 requires the Lottery
to return at least 87 percent of revenues to the public in the form of prizes and contributions to education, and
established a cap of 13 percent of revenues as the amount the Lottery may spend on operating expenses. Prior to
AB 142, the Lottery was required to return, as nearly as practical, 50 percent of revenues to the public in the form
of prizes; at least 34 percent to public education; and allocate no more than 16 percent to administrative costs. As
a result of the revenue distribution changes from AB 142, the Lottery expects to continue to deliver increases in sales
and revenues to the public in the form of both prizes and contributions to education.



It would appear that what you said is correct as of anytime prior to April 8th, 2010, during which time 50%, or as near as practical was to be returned in the form of prizes. It is worth noting that many lottery Drawing type games return something close to that, by design, so I imagine being under 51% on Drawing Games (as they were in 2019) would probably be fine.

It appears 142A.B. changed the requirement to 87% was to contribute to both education and prizes, combined, which would seem to open the door for more than 50% to be returned in the form of prizes. Prior to the bill, as shown in the quote, at least 34% had to go to education and only 50% (or as close as possible) to prizes.

We might, for comparison, look at the 2007-2008 Fiscal Year for the California Lottery:

https://www.yumpu.com/en/document/read/30507639/california-lottery-report-to-the-public-2008

And, we will see that the overall return to player of all ticket types was only 53.1%, with a little over 34% of all revenues going to education.

The result is that prizes can be a little better under California law, in terms of return-to-player, but it's possible for a lesser percentage to be going to education due to the fact that the percentage is now calculated as (Prizes + Education) >/= 87%...rather than education having to be some fixed minimum percentage by itself.
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SOOPOO
SOOPOO
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Mission146
May 7th, 2021 at 9:22:49 AM permalink
Quote: Mission146

Greetings!

This was a massive project that I did for WizardofOdds that has just gone up if anyone wants to take a look:

https://wizardofodds.com/online-gambling/articles/the-lottery-sucks

How bad are traditional forms of lottery (Instant tickets and Drawing games) in terms of return to player? How much do the residents of your state, on average, lose to traditional lottery in a year?

These and other questions will be answered on the WizardofOdds page, "The Lottery Sucks," in which I analyzed the game returns and losses per resident in every state that has a lottery.

By the way, do you know five states do not have a lottery? Try to write down which five you think they are before reading the page and see how many you get right!

Anyway, this took forever because I researched the Annual Lottery Report for each individual state in order to determine the returns on traditional lottery games and indexed those to determine what the loss, per resident (includes children) is to traditional forms of lottery.

For Delaware, in the table on the bottom of the page, I included the Delaware Sports Lottery and also Lottery that includes revenues derived from casinos, separately, just to give people a general idea what the numbers look like for states that have those going through the lottery department. West Virginia, for example, would have one of the greatest losses per resident in the entire country if these things were included, but are below average on loss/resident for traditional lottery revenues because there are more popular (and better returning) legal ways to gamble in the state.

Anyway, feel free to have a look and see how the states compare! Please leave any comments in this thread.

NOTE: I indexed my findings to average loss per resident rather than using lottery revenue per resident because, in my opinion, listing the actual dollar amount loss is more impactful for demonstrating how terrible the lotteries are.

WORST LOTTERY GAMES: Powerball, Mega Millions

BEST RETURN % LOTTERY GAMES: $20+ Instant Tickets (Horrible Expected Loss $$$ Amount, Though)

CHEAPEST GAMES BY EXPECTED LOSS (PER PLAY): $1 Instant Tickets, $1 Keno (Sometimes, and if available), $1 Pull Tabs (If Available)

. I read some, but not all, of your article. Forgive me if I missed it but..... isn’t the RTP actually MUCH worse than you calculate once real life tax consequences are considered. The overwhelming number of losing tickets sold do not qualify for a tax deduction, while at least the big jackpots are taxed at both the state and federal levels.
Mission146
Mission146
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May 7th, 2021 at 9:34:16 AM permalink
Quote: SOOPOO

. I read some, but not all, of your article. Forgive me if I missed it but..... isn’t the RTP actually MUCH worse than you calculate once real life tax consequences are considered. The overwhelming number of losing tickets sold do not qualify for a tax deduction, while at least the big jackpots are taxed at both the state and federal levels.



The effective RTP is, but that's also true of games in physical casinos and, in certain cases, state licensed and regulated commercial casinos...so it's really not appropriate (in my opinion) for House Edge purposes.

For example, is $1 denomination 9/6 Jacks or Better, "Worse," than $0.25 9/6 Jacks or Better because you might have to pay tax on the former (and would get a W2-G) if you hit a Royal?

So, your point is well-taken, but I'm only looking at it from the perspective of direct losses on buying the tickets.
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gamerfreak
gamerfreak
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Mission146MichaelBluejay
May 7th, 2021 at 10:06:24 AM permalink
Quote: SOOPOO

. I read some, but not all, of your article. Forgive me if I missed it but..... isn’t the RTP actually MUCH worse than you calculate once real life tax consequences are considered. The overwhelming number of losing tickets sold do not qualify for a tax deduction, while at least the big jackpots are taxed at both the state and federal levels.


Not only this, but I feel like the other point sharp gamblers miss when lambasting the RTP of state lotteries is that the average amount wagered is a fraction of what would be expected at any casino game.

There is obviously a lot of overhead associated with creating, printing, and distributing paper games. Retailers also take a cut. While Casinos also run with big overhead, I doubt the lottery would be profitable offering 90% RTP games when the average “session” is likely less than $10 in wagers.

It baffles me when I see -EV BJ or VP trip reports where someone drops serious coin is met with great interest by the same posters who would probably call lottery players suckers.

When it comes to recreational gambling, there are many other things to consider than RTP. For example, it’s probably more likely for an average player to win life changing money via lottery than any casino game.

If a recreational player can scratch their gambling itch spending $20/week on lottery tickets, that is a better value than any amount of time spent in a casino.
SOOPOO
SOOPOO
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Mission146
May 7th, 2021 at 10:21:03 AM permalink
Quote: Mission146

The effective RTP is, but that's also true of games in physical casinos and, in certain cases, state licensed and regulated commercial casinos...so it's really not appropriate (in my opinion) for House Edge purposes.

For example, is $1 denomination 9/6 Jacks or Better, "Worse," than $0.25 9/6 Jacks or Better because you might have to pay tax on the former (and would get a W2-G) if you hit a Royal?

So, your point is well-taken, but I'm only looking at it from the perspective of direct losses on buying the tickets.



We will thus have to agree to disagree. To figure in money that goes to the feds and state in any way as a ‘return to player’ to me is disingenuous. And to me, the answer to your question about the 9/6 JOB is a resounding YES. The $1 game is worse, unless you have a way with other losses to not pay additional taxes. For those winning $,$$$,$$$ or more, taxes are unavoidable.
Mission146
Mission146
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May 7th, 2021 at 10:26:43 AM permalink
Quote: gamerfreak

Not only this, but I feel like the other point sharp gamblers miss when lambasting the RTP of state lotteries is that the average amount wagered is a fraction of what would be expected at any casino game.

There is obviously a lot of overhead associated with creating, printing, and distributing paper games. Retailers also take a cut. While Casinos also run with big overhead, I doubt the lottery would be profitable offering 90% RTP games when the average “session” is likely less than $10 in wagers.

It baffles me when I see -EV BJ or VP trip reports where someone drops serious coin is met with great interest by the same posters who would probably call lottery players suckers.

When it comes to recreational gambling, there are many other things to consider than RTP. For example, it’s probably more likely for an average player to win life changing money via lottery than any casino game.

If a recreational player can scratch their gambling itch spending $20/week on lottery tickets, that is a better value than any amount of time spent in a casino.



I mostly agree with all of those points, though with a few caveats.

1.) I imagine that your first sentence is mostly true, but with a very high percentage of lottery revenues coming from a low percentage of players. I'll often see people buying $20, or more, in instant tickets either from the machine or the counter and just scratching off the barcodes and scanning them immediately.

2.) Your second paragraph is the only one that I disagree with a bit. Maybe not 90%, but they could certainly do better than ~50% on Drawing Tickets and ~70% (overall) on Instant Tickets and still be insanely profitable. You can look at $20 Instant Tickets that have an expected loss of more than $5---no way does it cost $5 for that one individual ticket to make its way to the retailer.

You can also see the lottery's preference for terrible return in effect for other games. I think I broke down an online lottery game (that wasn't technically a ticket, as it was through the PA Lottery website) and came up with an 81% return. There are online casinos in the state with over 98% VP games and they have to give the state a percentage of those revenues.

Another example is the televised Instant Keno type games---which usually have a return somewhere in the neighborhood of 60-80%.

All of this for less money to State Governments than just legalizing VLT's anywhere would result in.

3.) It depends on the BJ or VP games in question. If you look at 9/6 JoB with Optimal strategy, you lose not even fifty cents on $100 in action, by expectation. You lose that on a single Pick-Three ticket for $1.

4.) To the, "Life-Changing Money," if we're talking about only negative expectation games...maybe. It depends on how you define, "Life-Changing," and then that definition decides which one is more likely.

5.) I conditionally agree with your last sentence. It still depends on what they are playing and how much coin-in. $20 in lottery purchases can be an expected loss of up to a little over $10, if we're talking Powerball tickets.

My thing with the lottery is that I just wanted to make it clear how badly the return sucks and how much of every dollar in lottery purchases players can expect to lose.

If the primary concern is expected loss ($$$ amount), then the best way to gamble at a negative EV is to simply never gamble at a negative EV. If return percentage is considered most important, then it is fair to say that a player could get a better return percentage (game dependent) but may still lose more money, per play, per hour...whatever depending on how much has to be bet or how much is typically made in total bets.

But, yes, the expected loss of $20 in instant tickets (any game) in terms of actual cash lost is probably lower than playing your typical penny slot machine for an hour, or what have you. It's probably often less than a particular VP or Table Game depending on average bet and average amount of time played.

So, I don't disagree with any of that.
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Mission146
Mission146
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May 7th, 2021 at 10:33:30 AM permalink
Quote: SOOPOO

We will thus have to agree to disagree. To figure in money that goes to the feds and state in any way as a ‘return to player’ to me is disingenuous. And to me, the answer to your question about the 9/6 JOB is a resounding YES. The $1 game is worse, unless you have a way with other losses to not pay additional taxes. For those winning $,$$$,$$$ or more, taxes are unavoidable.



I guess it's not even so much, "Agree to Disagree," as it is a matter of only the lottery would know. I think taxable winnings for lottery games start at $600, but in order to figure all of that out, I would have to know how much is in the prize pool of a set of Instant Tickets (for one example) and then how much of that return is over $600 and what the effective tax rate of all of that would be.

Not only does the lottery NOT list sales/prizes for every type of Instant Ticket, a few lotteries don't even separate Instant Ticket prizes from those of drawing tickets in their Annual Reports. In fact, Maine was the only state to even separate Instant Ticket Sales/Prizes by Instant Ticket denominations---no other state even did that much.

So, in order to report it the way you're suggesting would be better (and I do not totally disagree with you) would take a nearly impossible amount of research. For some states, I'd literally have to physically go to the state and look at the back of some of the Instant Tickets to figure out the overall return and return distributions.

I do take your point on the JoB example; I really do, but it would require one to look at potential tax obligations as a part of the game rather than something that occurs outside of the game. It's also the type of caveat you would then have to do for every game for which some taxable jackpot is even possible. I guess what I am trying to say is that nobody determines the House Edge of games factoring those things in. Even slot machine PAR Sheets don't pay any attention to potential tax obligations.

ADDED: It's kind of like how potential employers list what the salary for a position is, not how much you would expect to receive after taxes.
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