At my local convenience store, and almost surely at yours, too, it is possible to buy upward of fifty different kinds of scratch-off lottery tickets. To do so, you must be at least eighteen years old, even though the tickets look like the décor for a kindergarten classroom. The dominant themes are primary colors, dollar signs, and shiny, as in gold bars, shooting stars, glinting horseshoes, and stacks of silver coins. When you are looking at a solid wall of them, they also resemble—based on the palette, font choices, and general flashy hecticness—the mid-nineties Internet. Some of them are named for other games, such as the Monopoly X5, the Double Blackjack, and the Family Feud, but most are straightforward about the point of buying them: Show Me $10,000!, $100,000 Lucky, Money Explosion, Cash Is King, Blazing Hot Cash, Big Cash Riches. If your taste runs toward Fast Ca$h or Red Ball Cash Doubler, you can buy one for just a buck; if you prefer VIP Club or $2,000,000 Gold Rush, a single ticket will set you back thirty dollars. All this is before you get to the Pick 3, Pick 4, Powerball, and Mega Millions tickets, which are comparatively staid in appearance—they look like Scantron sheets—and are printed out at the time of purchase.
The strangest of the many strange things about these tickets is that, unlike other convenience-store staples—Utz potato chips, Entenmann’s cinnamon-swirl buns, $1.98 bottles of wine—they are brought to you by your state government. Only Alabama, Alaska, Hawaii, Nevada, and Utah are not in the business of selling lottery tickets. Everywhere else, Blazing Hot Cash and its ilk are, like state parks and driver’s licenses, a government service.
How this came to be is the subject of an excellent new book, “For a Dollar and a Dream: State Lotteries in Modern America,” by the historian Jonathan D. Cohen. At the heart of Cohen’s book is a peculiar contradiction: on the one hand, the lottery is vastly less profitable than its proponents make it out to be, a deception that has come at the expense of public coffers and public services. On the other hand, it is so popular that it is both extremely lucrative for the private companies that make and sell tickets and financially crippling for its most dedicated players. One in two American adults buys a lottery ticket at least once a year, one in four buys one at least once a month, and the most avid players buy them at rates that might shock you. At my local store, some customers snap up entire rolls—at a minimum, three hundred dollars’ worth of tickets—and others show up in the morning, play until they win something, then come back in the evening and do it again. All of this, repeated every day at grocery stores and liquor stores and mini-marts across the country, renders the lottery a ninety-one-billion-dollar business. “Americans spend more on lottery tickets every year than on cigarettes, coffee, or smartphones,” Cohen writes, “and they spend more on lottery tickets annually than on video streaming services, concert tickets, books, and movie tickets combined.”
As those two sets of comparisons suggest, lottery tickets can seem like either a benign form of entertainment or a dangerous addiction. The question that lurks within “For a Dollar and a Dream” is which category they really belong to—and, accordingly, whether governments charged with promoting the general welfare should be in the business of producing them, publicizing them, and profiting from them.
Lotteries are an ancient pastime. They were common in the Roman Empire—Nero was a fan of them; make of that what you will—and are attested to throughout the Bible, where the casting of lots is used for everything from selecting the next king of Israel to choosing who will get to keep Jesus’ garments after the Crucifixion. In many of these early instances, they were deployed either as a kind of party game—during Roman Saturnalias, tickets were distributed free to guests, some of whom won extravagant prizes—or as a means of divining God’s will. Often, though, lotteries were organized to raise money for public works. The earliest known version of keno dates to the Han dynasty and is said to have helped pay for the Great Wall of China. Two centuries later, Caesar Augustus started a lottery to subsidize repairs for the city of Rome.
By the fourteen-hundreds, the practice was common in the Low Countries, which relied on lotteries to build town fortifications and, later, to provide charity for the poor. Soon enough, the trend made its way to England, where, in 1567, Queen Elizabeth I chartered the nation’s first lottery, designating its profits for “reparation of the Havens and strength of the Realme.” Tickets cost ten shillings, a hefty sum back then, and, in addition to the potential prize value, each one served as a get-out-of-jail-free card, literally; every lottery participant was entitled to immunity from arrest, except for certain felonies such as piracy, murder, and treason.
The lottery did not so much spread to America from England as help spread England into America: the European settlement of the continent was financed partially through lotteries. They then became common in the colonies themselves, despite strong Protestant proscriptions against gambling. In the Massachusetts Bay Colony, which held its first authorized lottery in 1745, dice and playing cards were forbidden even in private homes.
That contradiction can be explained in part by exigency; whatever its moral bent, early America was short on revenue and long on the need for public works. Over time, it also became, as Cohen notes, “defined politically by its aversion to taxation.” That made the lottery an appealing alternative for raising money, which was used for funding everything from civil defense to the construction of churches. Harvard, Yale, and Princeton were all financed partly by lotteries, and the Continental Congress attempted to use one to help pay for the Revolutionary War. (Lotteries formed a rare point of agreement between Thomas Jefferson, who regarded them as not much riskier than farming, and Alexander Hamilton, who grasped what would turn out to be their essence: that everyone “would prefer a small chance of winning a great deal to a great chance of winning little.”) And, like almost everything else in early America, lotteries were tangled up with the slave trade, sometimes in unpredictable ways. George Washington once managed a Virginia-based lottery whose prizes included human beings, and one formerly enslaved man, Denmark Vesey, purchased his freedom after winning a South Carolina lottery and went on to foment a slave rebellion.
This initial era of the American lottery was brought to an end by widespread concern about mismanagement and malfeasance. Between 1833 and 1880, every state but one banned the practice, leaving only the infamously corrupt Louisiana State Lottery Company in operation. Despite its name, the L.S.L.C. effectively operated across the country, sending advertisements and selling tickets by mail. So powerful was it that, as Cohen explains, it took the federal government to kill it off; in 1890, Congress passed a law prohibiting the interstate promotion or sale of lottery tickets, thereby devastating the Louisiana game and, for the time being, putting a stop to state lotteries in America.
Predictably, in the absence of legal lotteries, illegal ones flourished—above all, numbers games, which awarded daily prizes for correctly guessing a three-digit number. To avoid allegations that the game was fixed, each day’s winning number was based on a publicly available but constantly changing source, such as the amount of money traded on the New York Stock Exchange. Numbers games were enormously popular everywhere—in 1964, they raked in two hundred million dollars, about two billion in today’s money, in New York City alone—but especially so in Black communities, where they provided a much needed source of income. This was true mostly for their organizers and runners, whose ranks included Ella Fitzgerald and Malcolm X, but occasionally also for players who lucked into a windfall, such as Luther Theophilus Powell, who won ten thousand dollars on a twenty-five dollar bet in the nineteen-fifties and used it to buy a house in Queens for his wife, daughter, and young son, Colin Powell.
Eventually, numbers games proved so profitable that they were taken over by organized crime, sometimes with the aid of police officers who accepted bribes to shut down African American operators. Dutch Schultz and Vito Genovese both used the game to help bankroll their operations, and the Winter Hill Gang, Whitey Bulger’s crew, got its start partly by running numbers in Somerville, outside Boston. By the nineteen-fifties, increasing concern about the power and reach of the Mob culminated in a Senate investigation, the Kefauver committee, which judged profits from gambling to be the primary financial engine of crime syndicates in America. This declaration, and the torrent of news coverage it generated, had a paradoxical effect: it made lottery games seem so lucrative that, after decades of dismissing them as inappropriate for the honorable business of public service, state governments once again began to consider getting in on the take.
It is at this point that Cohen’s narrative really gets going; although he nods to the early history of the lottery, he focusses chiefly on its modern incarnation. This started, he argues, when growing awareness about all the money to be made in the gambling business collided with a crisis in state funding. In the nineteen-sixties, under the burden of a swelling population, rising inflation, and the cost of the Vietnam War, America’s prosperity began to wane. For many states, especially those that provided a generous social safety net, balancing the budget became increasingly difficult without either raising taxes or cutting services. The difficulty was that both options were extremely unpopular with voters.
For politicians confronting this problem, the lottery appeared to be a perfect solution: a way to maintain existing services without hiking taxes—and therefore without getting punished at the polls. For them, Cohen writes, lotteries were essentially “budgetary miracles, the chance for states to make revenue appear seemingly out of thin air.” For instance, in New Jersey, which had no sales tax, no income tax, and no appetite for instituting either one, legislators claimed that a lottery would bring in hundreds of millions of dollars, thereby relieving them of the need to ever again contemplate the unpleasant subject of taxation.
Dismissing long-standing ethical objections to the lottery, these new advocates reasoned that, since people were going to gamble anyway, the state might as well pocket the profits. That argument had its limits—by its logic, governments should also sell heroin—but it gave moral cover to people who approved of lotteries for other reasons. Many white voters, Cohen writes, supported legalization because they thought state-run gambling would primarily attract Black numbers players, who would then foot the bill for services that those white voters didn’t want to pay for anyway, such as better schools in the urban areas they had lately fled. (In reality, the oft-repeated claim that legalizing the lottery would merely decriminalize current gamblers rather than create new ones of all races proved dramatically wrong.) Meanwhile, many African American voters supported legalization because they believed that it would ease their friction with the police, for whom numbers games had long served as a reason—sometimes legitimate, sometimes not—to interrogate and imprison people of color.
Lottery opponents, however, questioned both the ethics of funding public services through gambling and the amount of money that states really stood to gain. Such critics hailed from both sides of the political aisle and all walks of life, but the most vociferous of them were devout Protestants, who regarded government-sanctioned lotteries as morally unconscionable. (Catholics, by contrast, were overwhelmingly pro-lottery, played it in huge numbers once it was legalized, and reliably flocked to other gambling games as well; Cohen cites the staggering fact that, in 1978, “bingo games hosted by Ohio Catholic high schools took in more money than the state’s lottery.”) As one Methodist minister and anti-lottery activist declared at the time, “There is more agreement among Protestant groups on the adverse effect of gambling than on any other social issue, including the issues of abortion, alcohol, and homosexuality.” Such adverse effects included fostering gambling addictions, sapping income from the poor, undermining basic civic and moral ideals by championing a route to prosperity that did not involve merit or hard work, and encouraging state governments to maximize profits even at the expense of their most vulnerable citizens.
However valid these concerns might have been, they were largely ignored. In 1964, New Hampshire, famously tax averse, approved the first state-run lottery of the modern era. Thirteen states followed in as many years, all of them in the Northeast and the Rust Belt. In the meantime, as Cohen recounts, the nation’s late-twentieth-century tax revolt intensified. In 1978, California passed Proposition 13, cutting property taxes by almost sixty per cent and inspiring other states to follow suit; in the early nineteen-eighties, with Ronald Reagan in the White House, federal money flowing into state coffers declined. With more and more states casting around for solutions to their budgetary crises which would not enrage an increasingly anti-tax electorate, the appeal of the lottery spread south and west.
As Cohen relates in perhaps the most fascinating chapter of his book, those pro-lottery forces had a powerful ally in Scientific Games, Inc., a lottery-ticket manufacturer that first made a name for itself by pioneering scratch-off tickets. In addition to delivering instant results, these tickets, like Ikea furniture, offer the appeal of active participation, which gives players the illusion of exercising some control over the outcome. Scratch-off tickets débuted to great success in Massachusetts in 1974; by 1976, every state lottery had jumped on the bandwagon. But that triumph presented a problem for Scientific Games, since it meant that the available market was saturated. To keep expanding its business, the company set about persuading more states to legalize the lottery. Starting in the late seventies, S.G.I. began hiring lobbyists, contracting with advertising firms, creating astroturf citizens’ groups, and spending millions of dollars to persuade voters in Arizona, California, Colorado, Iowa, Missouri, Oregon, and the District of Columbia to pass lottery initiatives.
Scientific Games was not the only company providing lottery services, but its competitors had largely eschewed lobbying, nominally out of ethical concerns but really because they were reluctant to spend money that they wouldn’t recoup if they didn’t land the resulting contracts. S.G.I. got around this difficulty by making sure that the lottery initiatives it backed contained language—allegedly intended to prevent the involvement of organized crime—that required extensive financial disclosures not only from all the executives at companies submitting a bid but from all the executives at their parent companies, too. That requirement alone made the bidding process too burdensome to be worthwhile for S.G.I.’s chief competitor, Webcraft Games, since it was owned by Beatrice Foods, which at the time was larger than Lockheed Martin, 3M, and Coca-Cola. The S.G.I.-supported initiatives also mandated tight timelines for the bidding process, giving the company a planning edge while making it virtually impossible for anyone else to complete the paperwork in time.
However dodgy this strategy may have been, it worked. Every lottery initiative backed by S.G.I. succeeded—and, in every case, the company was rewarded with a contract. That meant its lobbying investment paid off, spectacularly; in California, for instance, S.G.I. spent $2.4 million to pass a lottery initiative, then won the resulting forty-million-dollar contract. Wins like that soon turned Scientific Games into an unstoppable force within the lottery industry. By 1982, the company had printed its five-billionth ticket and was producing a million more every hour. At the same time, the lottery industry itself had become unstoppable, too—thanks to S.G.I. and the wave of legalizations, but also thanks to the introduction of a new version of a very old game of chance that, as Cohen writes, “fundamentally reshaped the place of lotteries in American society.”
Based on a betting game originally played in seventeenth-century Genoa, lotto is not self-evidently groundbreaking—or, for that matter, self-evidently appealing. To play, you guess a certain quantity of numbers from a specified range. The New York Lotto, for instance, requires six numbers between one and fifty-nine; the North Carolina lotto, five numbers between one and forty-three. The odds of getting all the numbers right are absurdly low—which, paradoxically, is why lotto revolutionized the industry.
Before the game was introduced, state jackpots were relatively modest. Their size was limited by the number of players, since payouts reflected a percentage of ticket sales, as well as by state lottery commissions, which set a cap on the prize money; from 1964 to 1979, jackpots seldom exceeded a million dollars. But lotto was a rollover game: if a drawing was held and nobody won—a common occurrence, given the odds—players could keep buying tickets. For those profiting from the lottery, this created a virtuous cycle. Every time the pot got bigger, more people were tempted to buy a ticket, and the more people bought tickets, the bigger the pot became.
The whole thing was hugely counterintuitive—the worse the odds of winning became, the more people wanted to play. Alexander Hamilton was right: to the average person, the difference between one-in-three-million odds and one-in-three-hundred-million odds didn’t matter, but the difference between a three-million-dollar jackpot and a three-hundred-million-dollar jackpot mattered enormously. Recognizing this, lottery commissioners began lifting prize caps and adding more numbers—say, six out of fifty instead of five out of thirty—thus making the likelihood of winning even smaller. The New York Lotto launched, in 1978, with one-in-3.8-million odds; today, the odds are one in forty-five million.
Despite all this, and to the despair of statisticians everywhere, lotto soon became the nation’s most popular lottery game. But although ticket sales and prize winnings soared, they did not do so equally across the country, since rollover jackpots disproportionately benefitted states with large populations and therefore more potential players. In response, smaller states banded together to form multistate lotteries, a trend that culminated in Powerball and Mega Millions, each of which started as a collaboration among a handful of states but is now played everywhere the lottery is legal. The resulting prizes are truly astronomical; this past July, two people who bought a lottery ticket in Illinois bucked one-in-three-hundred-and-two-million odds to win a $1.34-billion Mega Millions jackpot.
In some respects, the modern American lotto game is a product of technological change; it could not have existed prior to computer programs that enabled states to know more or less instantly whether anyone had purchased a ticket with the winning numbers. But Cohen makes a persuasive case that it was also a product of cultural change: the end of a shared reverence for middle-class stability and the rise, in the nineteen-eighties, of the veneration of extravagant wealth. The years in which lotto reshaped the national gambling scene were the years of deregulation and Reaganomics, Donald J. Trump and Alex P. Keaton, the première of “Lifestyles of the Rich and Famous” and a remake of “Brewster’s Millions.” Pastors were preaching the prosperity gospel; politicians were singing the praises of the unfettered free market. Suddenly, Cohen writes, “it was no longer taboo to collect a massive fortune; neither was it offensive to show it off. Wealth—not the prosperity of blue-collar workers but the fortunes of their bosses—became a means of reasserting the bounty of capitalism.”
The irony, as Cohen notes, is that this obsession with unimaginable wealth, including the dream of hitting a multimillion-dollar lottery jackpot, corresponded to a decline in financial security for most working people. Beginning in the nineteen-seventies and accelerating in the nineteen-eighties, the income gap between the rich and the poor widened, job security and pensions eroded, health-care costs and unemployment rose, and, for children born in those decades, our long-standing national promise—that education and hard work would render them better off than their parents—ceased to be true. Life, as it turned out, imitated the lottery: for most Americans, it was getting harder and harder to win.
The lottery was supposed to make all this better, not worse. Its advocates claimed that, by filling state coffers without increasing state taxes, it would keep money in the pockets of average citizens. But this premise, which led state after state to approve lotteries, was simply untrue. Evidence from the first legalized lotteries quickly put paid to the fantasy that they would provide sufficient income to fund much of the business of running a state. In New Jersey, where proponents had imagined proceeds on the order of hundreds of millions of dollars, the lottery brought in thirty-three million dollars in its first year—about two per cent of the state’s revenue.
When figures like that proved typical of the era, legalization advocates, no longer able to sell the lottery as a statewide silver bullet, ginned up other strategies instead, often with the help of Scientific Games. Rather than argue that a lottery would float most of a state’s budget, they began claiming that it would cover a single line item, invariably a government service that was popular and nonpartisan—most often education, but sometimes elder care or public parks or aid for veterans. One virtue of this narrower approach was that it made campaigning for legalization easy. A vote for the lottery was not a way of supporting gambling but a way of supporting veterans; a vote against the lottery was a vote against education.
These campaigns were extraordinarily effective but, as with the earlier ones, fundamentally misleading. For one thing, they, too, wildly inflated the impact of lottery money on state finances. In California, where an S.G.I.-backed lottery initiative passed after a high-profile campaign touted it as a boon for schoolchildren, the resulting revenue covered, in the lottery’s first year, about five per cent of the state education budget. As of this year, according to the California Department of Education, lottery income accounts for roughly one per cent of all K-12 funding.
But that was not the worst of it. Again and again, education and other line items that served to persuade people to pass lottery proposals did not actually get any additional funding; instead, the revenue went into the state’s general fund. After this happened in California, other states mandated that lottery money flow directly into specified programs, but, as is so often the case, when one loophole closes, another one opens. In Illinois, Florida, and Virginia, among other states, the lottery revenue did indeed go to a designated education fund—whereupon legislators offset those gains by reducing the money coming in from general appropriations. In the end, Cohen writes, “the lottery supplanted, rather than supplemented, state spending on education.”
Today, according to the National Conference of State Legislatures, lotteries bring in, on average, about one per cent of state revenue per year. Like all money, it matters, but whatever difference it makes is offset by two problems. The first is that lotteries have made it harder than ever to pass much needed tax increases, because, thanks to years of noisy campaigning followed by decades of heavy promotion, the public wrongly believes that schools and other vital services are lavishly supported by gambling funds. The second is that the money raised by lotteries comes largely from the people who can least afford to part with it. Every state lottery is regressive, meaning that it takes a disproportionate toll on low-income citizens. Rich people do play the lottery, of course; one of the largest-ever Powerball jackpots, a quarter of a billion dollars, was won by three asset managers from Greenwich, Connecticut. But the wealthy buy fewer tickets than the poor (except when jackpots approach ten figures); because of that and because their purchases constitute a much smaller percentage of their income, playing the lottery has a far smaller impact on their pocketbooks. The difference can be drastic: according to the consumer financial company Bankrate, players making more than fifty thousand dollars per year spend, on average, one per cent of their annual income on lottery tickets; those making less than thirty thousand dollars spend thirteen per cent. That means someone making twenty-seven thousand dollars loses some thirty-five hundred dollars to the lottery every year. To put that number in context, nearly sixty per cent of Americans have less than a thousand dollars in savings.
Defenders of the lottery sometimes cast it as a tax on the stupid, meaning either that players don’t understand how unlikely they are to win or that they enjoy the game anyway. This suggests that lottery spending is a wholly personal rather than a partly structural decision, but in reality it is responsive to economic fluctuation; as Cohen writes, “Lottery sales increase as incomes fall, unemployment grows, and poverty rates rise.” As with all commercial products, lottery sales also increase with exposure to advertising—and lottery products are most heavily promoted in neighborhoods that are disproportionately poor, Black, or Latino. In Texas, where the minimum wage is $7.25, you can buy a fifty-dollar scratch-off ticket at a check-cashing venue or pick up Powerball and Mega Millions tickets, like Snickers bars, while paying for groceries at a Dollar General. Nor are state lottery commissions above availing themselves of the psychology of addiction. Everything about the lottery—from ad campaigns to the look of the front of the tickets and the math behind them—is designed to keep players coming back for more. None of this is particularly different from the strategies of tobacco companies or video-game manufacturers. It just isn’t normally done under the auspices of the government.
In the final pages of “For a Dollar and a Dream,” Cohen, a fair and meticulous collector of data, finally puts his thumb on the scale. Considering the regressive nature of state lotteries, their predatory practices, their role in fostering gambling addictions, the way they discourage normal taxation, and their relatively modest financial contributions, he concludes that they “should not exist in the modern United States.” As he acknowledges, this advice is not likely to be taken anytime soon; no state has repealed its lottery in more than a hundred and twenty-five years. Still, he argues, we should work toward common-sense reforms, such as banning the sale of tickets online, capping the cost of scratch-off tickets and the size of lotto jackpots, and, perhaps most important, closing a loophole that leaves lotteries exempt from F.T.C. regulation, and thus free from the constraints of truth-in-advertising laws.
What would happen if state lotteries waned in influence or vanished altogether? Cohen surely overreaches when he claims that, “without such a blinding beacon, more Americans might be willing to think critically about the economic forces that have degraded access to social mobility and have made it more difficult for people to attain financial security.” But he is right that governments in a democratic society should be in the business of improving the odds, not rigging the game, and that there are far more equitable and effective ways for the state to use its mighty powers to improve life for its citizens. As the California Lottery put it in a 2013 advertising campaign, “Believe in something bigger.” ♦
