Lottery Revenues – Using the Money

The lottery is a form of gambling in which you pay a small amount of money for the chance to win a large prize. It is often organized so that a percentage of the profits goes to good causes.

History of the Lottery

In the early years of America, lotteries were widely used to finance public works projects such as roads, libraries, churches, colleges, canals, and wharves. Several colonies also sponsored lotteries for the purpose of raising money to support fortification and local militias.

Lottery Revenues: Using the Money

In a lottery, money collected from sales is distributed into three major categories: drawing pool; prize pool; and administrative costs. The first category, drawing pool, includes all the tickets eligible for a particular drawing.

The second category, prize pool, contains the money paid to winners in that drawing. The third category, administrative costs, is a catchall for the various expenses incurred in running the lottery.

Advertising and Marketing

Because lottery revenues are derived from the sale of lottery tickets, they must be promoted to maximize their appeal. Thus, the state must encourage retailers to advertise and promote the games by providing them with demographic information about potential customers.

Critics argue that the lottery’s advertising often presents misleading information about the odds of winning, inflates the value of the jackpot prizes (which are usually paid in equal annual installments over 20 years), and so on. They also charge that running a lottery at cross-purposes with the larger public interest is not an appropriate function for the state.