The real winners and losers in America's lottery obsession

Sign up for the On Point newsletter here. 

Americans spend almost $100 billion on state lotteries annually.

That's more money than you spend on books, sports tickets, video games, music and movie tickets combined.

A few big winners, a lot of losers. Including every state that relies on lottery revenue.

So where does the rest of the money go?

Today, On Point: The real winners and losers in America's lottery obsession.

Jonathan D. Cohen, historian. Author of For a Dollar and a Dream: State Lotteries in Modern America. Program director of American Institutions, Society and the Public Good at the American Academy of Arts and Sciences. (@JonathanDCohen1)

On a history of state lotteries

Jonathan D. Cohen: "Lotteries have been used for raising money for civic purposes, as far as I can tell, back to the 15th century in Genoa. Some scholars say as early as the construction of the Great Wall of China, was funded in part through moneys raised for lotteries. I haven't seen the evidence on that. But as a result, the lottery is not like legalizing marijuana, which actually does happen very briefly in a couple of states in the 70s.

"But it is not this out of left field idea. It's sort of known as a practice, as a way of raising money for government. And we can get into this in more detail. There are also in the states that have the first the first lotteries in the Northeast and the Rust Belt.

"There is this huge operation of illegal numbers, games of illegal lotteries that show voters and legislators how profitable these games are and lead folks to reason that if people are already going to gamble, they might as well legalize and make money for the state, rather than through racketeers or organized crime."

How the modern state lottery system began in New Hampshire 

Jonathan D. Cohen: "New Hampshire, you know, famously tax averse, one of only three states in the 1960s without a sales [tax] or an income tax. So really sort of heavily reliant on property taxes and willing to take a chance. And the New Hampshire lottery, I can't even describe how insane it is compared to what we have today. But they sort of really try to create this legitimacy for the games or all these fears in the 1960s that the games are going to be corrupt and infiltrated by organized crime.

"So, the first head of the New Hampshire lottery direct, the first head of the New Hampshire lottery, it's called the New Hampshire Lottery Sweepstakes. Is a former FBI agent because that's sort of the only way that they could garner the sufficient trust that the games were going to be on the level. And the games themselves are insane. It's basically a raffle, but you're not really buying a ticket for a numbers drawing. You're buying it for a horse race. And there's going to be a separate drawing to see which horse race ties to which prize and then a third drawing.

"It's really complicated and not worth getting into. But again, it's just sort of emblematic of the fears at the time of corruption, what sort of small enterprise this was compared to the, you know, multibillion dollar industry we have today and also the need for legitimacy that was so important culturally in order to enable the legalization of gambling at a really tenuous point in American history."

On the creation of instant tickets in Massachusetts

Jonathan D. Cohen: "Scientific games, Inc. who you alluded to at the top is a creator of scratch tickets, instant tickets as we know them today, which are introduced at a $1 price point in Massachusetts in 1974. And the premise here is that the games that existed at the time, they would take like weeks or months to have a drawing. We didn't have Lotto, you know, Powerball, Mega millions where you have a couple of drawings a week.

"You have to wait a while for the drawings. And the creators of scientific games had worked on, I guess whatever the 1960s equivalent of like the Shaw's and Star Market, Albertson's monopoly game. Like when you go to the grocery store, and they have those promotions. They had developed those first and they adapted them into lotteries.

"And ... as you alluded to at the top, they sell like wildfire and starting in Massachusetts and then spreading to every other state. The problem for Scientific Games is that there are only 14 state lotteries by the end of 1977, and they want to keep selling tickets and they want to keep adding markets for their tickets. But to their mind, there's no place else to go."

On reforms to state lotteries

Jonathan D. Cohen: "There are a couple and they're all actionable at the state level or most of them are. And I will say all of them have precedent. These are all things that have been part of sort of the lottery industry or were part of the lottery industry going back a couple decades. And that states gradually just got rid of because they were tired of, you know, interferences and making money and they just wanted to make money and didn't care as much about the social good. I'm talking about things like putting caps back on scratch tickets.

"I don't think we need to return to just the $1 scratch ticket that we had in 1974. But maybe, maybe Massachusetts should stop at $25, $30. Maybe we don't need that $50 or $100 scratch ticket. Ditto with the cap on rollover prizes for Mega millions Powerball. You know, reduce the odds that they will create rollover media frenzies that will attract more people to play and that those frenzies, you know, offer essentially gateway drugs for people to get in and just start playing the lottery and they get hooked and so on. Another big one would be, as we've discussed, advertising both Congress and congressional level.

"And this is the only one that would require congressional intervention would be the closing of the Federal Trade Commission loophole that exempts lotteries from truth in advertising law. But also states like Texas, Missouri had one, but they got away with it. They did away with it. Minnesota have restrictions on lottery advertising, both how much of the state's lottery revenue can be spent on advertising, the specific sort of tone and content of that advertising.

"To your point, I don't know. You know, I've not seen any studies that show, oh, the Texas lottery is 5% less harmful, for example, because of these regulations. But they are a good way to start. A good place to start in terms of at least trying to rein in this industry and rein in something that. Has become a totally normal but yet bizarre part of the American commercial landscape."

Next Big Idea Club: "For A Dollar and A Dream: State Lotteries in Modern America" — "Americans spent roughly $98 billion on lottery tickets last year. For reference, that’s more than Americans spent on cigarettes, coffee, or smartphones."