Why Everyone Loses With State Lotteries

Issue 1

Inconsistent Governmental Purpose

The first major problem is that States are running businesses in the first place. You might say that the government should be involved in certain businesses, and I would agree with you. What are some of those businesses that they might want to be Involved with?

1. Postal Service

2. Defense

3. Distribution of taxpayer revenue through social programs

Before you think I am someone with an anti-gambling agenda let me tell you some information about myself. Up until about a year ago I played poker online practically every day. I was a winning player. I have absolutely no problem with people who gamble or their right to gamble

If you look at the history of how the lottery came into being you'll see that it was something that was invented by the mafia. The mafia ran the exact types of games that every state with a lottery currently runs. Play 3 and Play 4. The premise for these games is very simple. You pick three or four numbers and if they hit you win a predetermined prize. That prize in the old days was 600 dollars for play three and a similar ratio for play four in relation to their odds of actually hitting. The person taking the bets had a lot of risk. In order to be able to make concentrated payouts he needed large margins. If someone were to get really lucky he had to pay them a lot of money. So he took a real risk by being in the business. Besides the financial risk he also had the risk of being prosecuted for racketeering by none other than his future competition, the state.(also the federal government depending on the situation)

The States on the other hand have practically unlimited funds and liquidity in their lottery games. Do they offer better odds than the Mafia Racketeer-er did? No their odds are actually worse. On a play three number hit "straight" they only pay 500-1. Now you might say to yourself "wow 500-1" seems like a great deal. Well the odds on the game are 1000-1. Which means that for every dollar you bet you lose 50 cents.

Of course the states had a legitimate reason to want to have control of this gaming. When I use the word "control" please don't confuse it with the word "run". There are plenty of ways to have control of something without running it. That's the entire purpose for regulation right? You let a private business run something and then you monitor their activity to make sure that it is legitimate.

That is not how it has gone. They take the position that the games are so bad that they are the only entity that can both run them and police them. It's an inherently hypocritical and disingenuous position. States will fight all other forms of gambling for "moral" reasons and then provide the most mathematically corrupt and degenerate games possible. So they'll advertise a game that has such terrible odds that only very poor or desperate or addicted people would play it for a lot of money and then claim moral indignation when anyone wants to offer a competing form of gambling. Even when that competing form of gambling would substantially reduce the financial cost to its customers.

You would think that since the odds of a such a game are so terrible that they might passively run such games. I say "passively" in the sense that they would offer them but not encourage people to play them. Wouldn't it look terrible if the State were encouraging me to gamble in a game with terrible odds that they offered? They say they are collecting money for "causes" and "education". All programs that try to help a large percentage of the people who are likely to not have the education to understand the mathematical prospects of the games that you target toward them to exploit their lack of education. So since the goal of this lottery thing was to help keep organized crime in check, they only offer the game to the point where it takes away the incentive of the Mafia to be involved in it, right?

Nope. You can buy a lottery ticket in practically any store in a state with a lottery and they advertise on TV. With catchy slogans and PR departments creating classics like "you can't win if you don't play". If I am a compulsive gambler what better endorsement can I get? From the very same group of people who can help me to adopt a child from a state run orphanage. Wow they want me and my new family member to play the lottery! It can't be that bad since the state offers it. It's like food stamps or the state police. It's an important social service that they are advertising I be involved with and contribute my money to. You get my point? The reality is that survey after survey will and has shown that the single largest demographic for lottery ticket customers are poor people. These people are at or near the poverty line.

Issue 2

It's For The Kids! - Propaganda Creation

You'll see this in every PR stance of the lottery. The lottery revenue will help some organization or cause. What that really means is that the money goes to the States general fund. That's why they are so focused on annuities for large lotto prizes. Time. They want to delay the amount of time it takes for a winner to receive his money. It's not for the "kids". It's just one hand stealing from the other hand and lumped into the same pool of money. Even if it were for the kids, are poor peoples children just as valuable as lottery players children? Of course they are. So why would you target a group of games with terrible financial prospects at the very same demographic that you claim to be trying to help? If you want to help how about offering games that don't make them lose huge percentages of what they spend and that offered fair prizes for the amount of money being invested?

Issue 3

They Tax You Twice(Minimum) - Taxation Compression

In almost every game the lottery offers they take 50 percent of every dollar that you spend on the game. If you play scratch tickets or play three you can avoid going to "lotto headquarters" to collect your prize. Any other time you're getting taxed at least twice and as much as four times on the 6 number lotteries.

The state runs the lotto and takes 50 percent. If you win above 600 dollars they take State and federal income taxes. If you win a jackpot they take half and then half again if you take the lump sum and then you still have to pay federal taxes.

The concept of paying an annuity for the jackpot is the biggest scam the lottery has. Let's say 100 million dollars was spent on lottery tickets. That means the jackpot in such a situation would be 50 million dollars. So I get 50 million dollars if I win right? No you get an ANNUITY for 50 million dollars.

So let's say I take the annuity what do I get? You get a payment of 1/20th the amount every year for 20 years on a 20 year annuity. What about my interest? Don't they owe me interest? No they use the interest from the original 50 million dollars that is supposed to go to the jackpot to pay the annuity. So they essentially keep 100 percent of that money unless you decide to take the "lump sum". So what happens then? Well you get half of what is supposed to be yours by winning the jackpot or 25 million dollars. Then the state taxes you on THAT money along with the federal government. So you might wind up with 16 million after all is said and done. So a group of people contribute to a jackpot of 100 million so that an eventual winner can end up with 16 million dollars and governments can keep the rest. Sounds to me like you can't win if you DO play.

Issue 4

They Try to Block Everyone Else - Competitive Entrenchment

A state has a lot of power. When they decide to run a business it can be very difficult for a private business to get into that business or to start any business that competes with that business. The reason is that they are desperate for the revenue that the lottery provides so entrenchment is the result. Even if the private business could provide a better value to their customers that wouldn't matter to the States. See the States are irresponsible with their budgets. So when they have a cash cow in their hands like a lottery they want to keep that cash cow because they refuse to be efficient and stop spending money in an out of control manner. The State doesn't fundamentally care about a business that wants to give their customers a better deal or price. It only cares about entrenchment and political survival and trying to continue its corrupt practices. Where's the mafia when you need them?

Issue 5 - Plausible Deniability With Otherwise Totalitarian Redistribution Schemes

States can win the lotto too! How exciting for them. How does that happen? It happens when no one claims a winning ticket. I bet it's exciting over at lottery headquarters when someone hasn't claimed a jackpot. Wouldn't you be excited if you got to steal millions of dollars based on a technicality and what amounts to fraud? I go into a store and buy a lottery ticket. I win a 100 million dollars. It's a rare thing. I might not treat that winning ticket like it's worth a 100 million dollars when I've never won anything from all the other tickets I faithfully purchased. Well if I don't claim my ticket within 6 months to a 1 year the State gets to keep everything!

Shouldn't they award that money to the other people who purchased tickets in that drawing? Or how about giving it to all the second place winners in that drawing instead of keeping it? So let's say I got five numbers right. I have to go to "lottery headquarters" to claim my prize and pay the taxes. So it would be fairly easy to figure out how many second place winners their were and to divide the jackpot up and send them out checks.

Of course it would be easy to do that. Their goal is to keep the money. How can they keep the money if they pay it out? That's the question that keeps lotto commissioners up at night. That's why in many States they recently lowered the amount of time that someone has to claim their prize. So not only do they want to steal your lottery winnings they want to do it quicker.