AskDefine | Define lottery

Dictionary Definition

lottery

Noun

1 something that is regarded as a chance event; "the election was just a lottery to them"
2 players buy (or are given) chances and prizes are distributed according to the drawing of lots [syn: drawing]

User Contributed Dictionary

English

Pronunciation

  • a UK /ˈlɒtə(ɹ)i/ /"lQt@(r)i/

Noun

  1. A scheme for the distribution of prizes by lot or chance, especially a gaming scheme in which one or more tickets bearing particular numbers draw prizes, and the rest of tickets are blanks.
  2. An affair of chance.
  3. obsolete Shakespeare Allotment; a thing allotted.

Translations

scheme for the distribution of prizes by lot or chance
affair of chance
Allotment; a thing allotted

Extensive Definition

''For other articles concerned with Lotteries see Lottery (disambiguation).
A lottery is a popular form of gambling which involves the drawing of lots for a prize. Some governments outlaw it, while others endorse it to the extent of organizing a national lottery. It is common to find some degree of regulation of lottery by governments.
At the beginning of the 20th century, most forms of gambling, including lotteries and sweepstakes, were illegal in many countries, including the U.S.A. and most of Europe. This remained so until after World War II. In the 1960s casinos and lotteries began to appear throughout the world as a means to raise revenue in addition to taxes.
Lotteries are most often run by governments or local states and are sometimes described as a regressive tax, since those most likely to buy tickets will typically be the less affluent members of a society. The astronomically high odds against winning have also led to the epithets of a "tax on stupidity", "math tax" or "voluntary tax". They are intended to suggest that lotteries, being an addictive form of gambling, are governmental revenue-raising mechanisms that will attract only those consumers who fail to see that the game is a very bad deal. Indeed, the desire of lottery operators to guarantee themselves a profit requires that an average lottery ticket be worth substantially less than what it costs to buy. After taking into account the present value of the lottery prize as a single lump sum cash payment, the impact of any taxes that might apply, and the likelihood of having to share the prize with other winners, it is not uncommon to find that a ticket for a typical major lottery is worth less than one third of its purchase price. The large multi million dollar prize lotteries in the USA are paid by annuity over 20 years. Therefore, if you take a one-time lump sum cash payment, plus pay the federal taxes, you will end up with about one third of the total prize money offered.
Lotteries come in many formats. The prize can be fixed cash or goods. In this format there is risk to the organizer if insufficient tickets are sold. The prize can be a fixed percentage of the receipts. A popular form of this is the "50-50" draw where the organizers promise that the prize will be 50% of the revenue. The prize may be guaranteed to be unique where each ticket sold has a unique number. Many recent lotteries allow purchasers to select the numbers on the lottery ticket resulting in the possibility of multiple winners.
The fact that lotteries are commonly played leads to some contradictions against standard models of economic rationality. However, the expectations of some players may not be to win the game, but to experience the thrill and indulge in a fantasy of possibly becoming wealthy. Even ignoring the thrill factor, there is the theoretical possibility that the purchase of a lottery ticket could represent a gain in expected utility, even though it represents a loss in expected monetary value, thus making the purchase a rational decision. Insurance, for instance, represents negative expected monetary value but is not considered to be a tax on stupidity because it is generally believed to deliver positive expected utility to the individual.
Lottery tickets are usually scanned in large numbers, using marksense-technology. With today's computer performance, it takes less than one second to check if a particular combination was picked up by anyone, even for lotteries like Euromillions or Mega Millions.

Early history

The first signs of a lottery trace back the Han Dynasty between 205 and 187 B.C., where ancient Keno slips were discovered. The lottery has helped finance major governmental projects like the Great Wall of China. From the Chinese "The Book of Songs" (second millennium B.C.) comes a reference to a game of chance as "the drawing of wood", which in context appears to describe the drawing of lots. From the Celtic era, the Cornish words "teulet pren" translates into "to throw wood" and means "to draw lots". The Iliad by Homer refers to lots being placed into Agamemon's helmet to determine who would fight Hector.
The first known European lottery occurred during the Roman Empire, and was mainly done as a form of amusement at dinner parties. Each guest would receive a ticket, and prizes would often consist of fancy items such as dinnerware. Every ticket holder would be assured of winning something. This type of lottery however, was no more than the distribution of gifts by wealthy noblemen during the Saturnalian revelries. The earliest records of a lottery offering tickets for sale is the lottery organized by Roman Emperor Augustus Caesar. The funds were for repairs to the City of Rome, and the winners were given prizes in the form of articles of unequal value.
The earliest public lottery on record is that which was held in the Dutch town of Sluis in 1434. The first recorded lotteries to offer tickets for sale with prizes in the form of money were held in the Low Countries during the period 1443-1449. Various towns in Flanders (parts of Belgium, Holland, and France), held public lotteries to raise money for town fortifications, and raising money to help the poor. The town records of Ghent, Utrecht, and Bruges, indicate that the lotteries may well be of even greater antiquity. An early record dated May 9,1445 at L'Ecluse, refers to raising funds to build walls and town fortifications, with a lottery of 4,304 tickets and total prize money of 1737 florins. In the seventeenth century it was quite normal in The Netherlands to organize lotteries in order to collect money for the poor. Tickets cost about four guilders and the prizes were paintings (50 to 100 per lottery); some of these the paintings were produced by nowadays famous painters as Jan van Goyen.
The Dutch were the first to shift the lottery to solely money prizes and base prizes on odds (roughly about 1 in 4 tickets winning a prize). The lottery proved to be very popular, and was hailed as a painless form of taxation. In the Netherlands the lottery was used to raise money for e.g. supporting poor people, building dikes, construction of defense works for towns and to buy free sailors from slavery in the Arab countries. The English word lottery stems from the Dutch word loterij, which is derived from the Dutch noun lot meaning fate. The Dutch state owned staatsloterij is the oldest still existing lottery.

England, 1566-1826

Although it is more than likely that the English first experimented with raffles and similar games of chance, the first recorded official lottery was chartered by Queen Elizabeth I, in the year 1566, and was drawn in 1569. This lottery was designed to raise money for the "reparation of the havens and strength of the Realme, and towardes such other publique good workes." Each ticket holder won a prize, and the total value of the prizes equaled the money raised. Prizes were in the form of silver plate and other valuable commodities. The lottery was promoted by scrolls posted throughout the country showing sketches of the prizes. Thus, the lottery money received was a loan to the government during the three years that the tickets ('without any Blankes') were sold. In later years, the government sold the lottery ticket rights to brokers, who in turn hired agents and runners to sell them. These brokers eventually became the modern day stockbrokers for various commercial ventures. Most people could not afford the entire cost of a lottery ticket, so the brokers would sell shares in a ticket; this resulted in tickets being issued with a notation such as "Sixteenth" or "Third Class."Many private lotteries were held, including raising money for The Virginia Company of London to support its settlement in America at Jamestown. The English State Lottery ran from 1694 until 1826. Thus, the English lotteries ran for over two hundred and fifty years, until the government under constant pressure from the opposition in parliament declared a final lottery in 1826. This lottery was held up to ridicule by contemporary commentators as "the last struggle of the speculators on public credulity for popularity to their last dying lottery."

Colonial and early America, 1612-1900

An English lottery authorized by King James I in 1612, granted the Virginia Company of London the right to raise money to help establish settlers in the first permanent English colony at Jamestown, Virginia.
Lotteries in colonial America played a significant part in the financing of both private and public ventures. It has been recorded that more than two hundred lotteries were sanctioned between 1744 and 1776 where they played a major role in financing projects that included roads, libraries, churches, colleges, canals, bridges, etc. In the 1740s, Princeton and Columbia University had their beginnings financed by lotteries, as did the University of Pennsylvania by the Academy Lottery in 1755.
During the French and Indian Wars, several colonies used lotteries to supplement the cost of building fortifications and supporting their local militia. In May 1758, the State of Massachusetts raised money with a lottery for the "Expedition against Canada." Benjamin Franklin organized a lottery to raise money to purchase cannon for the defense of Philadelphia. Several of these lotteries offered prizes in the form of "Pieces of Eight." George Washington's Mountain Road Lottery was unsuccessful in 1768. However, these rare lottery tickets bearing George Washington's signature have become collector's items which sell for about $15,000 in 2007. Later, in 1769, Washington was a manager for Col. Bernard Moore's "Slave Lottery" whereby land and slaves were advertised as prizes in the Virginia Gazette. At the outset of the Revolutionary War, the Continental Congress used lotteries to raise money to support the Colonial Army. Alexander Hamilton wrote that lotteries should be kept simple, and that, "Everybody...will be willing to hazard a trifling sum for the chance of considerable gain...and would prefer a small chance of winning a great deal to a great chance of winning little." Taxes had never been accepted as a way to raise public funding for projects, and this led to the popular belief that lotteries were a form of a hidden tax.
At the end of the Revolutionary War the various states had to resort to lotteries to raise funds for numerous public projects. For many years these lotteries were highly successful and contributed to the nation's rapid growth. The lotteries were used for such diverse projects as the Pennsylvania Schuylkill - Susquehanna Canal (lottery in May, 1795), and Harvard College (lottery in March, 1806). Many American churches raised needed building funds through state authorized private lotteries.
However, they eventually became a source of financial mismanagement and scandal. Most notorious of the lotteries was the Louisiana State Lottery (1868-1892) which was aptly called the "Golden Octopus" because its tentacles reached into every home in America.
Toward the end of the nineteenth century a large majority of state constitutions banned lotteries. Finally, on July 29, 1890, U.S. President Benjamin Harrison sent a message to Congress demanding "severe and effective legislation" against lotteries. Congress acted swiftly, and banned the U.S. mails from carrying lottery tickets. The Supreme Court upheld the law in 1892, and that brought a complete halt to all lotteries in the U.S.A. by 1900.
When lotteries raised their head again in 1964, it would take many years of constitutional amendements by the various states before the lotteries were allowed to flourish again...and flourish they did.
On March 12, 1964, the New Hampshire Sweepstakes became the first state to sell lottery tickets in the modern era.
For modern USA lotteries visit: Lotteries in the United States

Countries with a national lottery

  • Dominican Republic: Lotería Electrónica Internacional Dominicana S.A.
  • Ecuador: Lotería Nacional
  • Mexico: Lotería Nacional para la Asistencia Pública and Pronósticos para la Asistencia Pública

Europe

Asia

Africa

  • South Africa: South African National Lottery
  • Kenya: Toto 6/49, Kenya Charity Sweepstake,

Country lottery details

In several countries, lotteries are legalized by the governments themselves. In addition, with the explosion of the internet, several online web-only lotteries and traditional lotteries with online payments have surfaced. In the web-only lotteries, the user has to select his pick and either watch an ad for a few seconds before his pick is confirmed or has to click on a web banner/link to register his pick in the system. The numbers may be drawn by the site that runs the online lotto or might be linked to a major physical lotto draw to ensure reliability. Prize money ranges from $100,000 to $10 million.

United States

In the United States, the existence of lotteries is subject to the laws of each state; there is no national lottery.
|World's largest jackpot |- |$365m |Powerball |United States |One ticket bought jointly by eight co-workers at a Nebraska meat processing plant |18 February 2006 |World's largest single ticket winner |- |$363m |The Big Game |United States |Two winning tickets: Larry and Nancy Ross (Michigan), Joe and Sue Kainz (Illinois) |9 May 2000 |The Big Game is now named Mega Millions |- |€180m |EuroMillions |France(2), Portugal(1) |Three ticket holders |3 February 2006 |Europe's largest jackpot |- |€115m |EuroMillions |Ireland |Dolores McNamara |29 July 2005 |Europe's largest single winner and the world's largest single payout. |- |€71.8m |SuperEnalotto |Italy |One ticket bought jointly by ten bar customers in Milan |4 May 2005 |Largest Italian prize |- |£42m |National Lottery |United Kingdom |Three ticket holders |6 January 1996 |Largest UK prize |- |£35.4m |EuroMillions |UK |Angela Kelly, 40, East Kilbride, South Lanarkshire http://news.bbc.co.uk/1/hi/scotland/glasgow_and_west/6946613.stm |10 August 2007 |Largest UK single winner |- |€37.6m |National Lottery |Germany |Won by a nurse from North Rhine-Westphalia |7 October 2006 |Largest German prize and single winner |- |€16.2 m |National Lottery |Ireland |Paul and Helen Cunningham |28 July 2007 |Biggest single winner and jackpot (Ireland) |}
On 20 September 2005 a primary school boy in Italy won £27.6 million in the national lottery. Although children are not allowed to gamble under Italian law, children are allowed to play the lottery. http://www.dailyrecord.co.uk/news/tm_objectid=16164112&method=full&siteid=66633&headline=primary-pupil-s--pound-27m-lotto-win--name_page.html

Payment of prizes

Winnings are not necessarily paid out in a lump sum, contrary to the expectation of many lottery participants. In certain countries, such as the USA, the winner gets to choose between an annuity payment and a one-time payment. The one-time payment is much smaller, indeed often only half, of the advertised lottery jackpot, even before applying any withholding tax to which the prize may be subject. The annuity option provides regular payments over a period that may range from 10 to 40 years.
In some online lotteries, the annual payments can be as little as $25,000 over 40 years, with a balloon payment in the final year. This type of installment payment is often made through investment in government-backed securities. Online lotteries pay the winners through their insurance backup. However, many winners choose to take the lump-sum payment, since they believe they can get a better rate of return on their investment elsewhere.
In some countries, lottery winnings are not subject to personal income tax, so there are no tax consequences to consider in choosing a payment option. In Canada, Australia, Ireland, and the United Kingdom all prizes are immediately paid out as one lump sum, tax-free to the winner.
In the United States, federal courts have consistently held that a lump sum payments received from third parties in exchange for the rights to lottery annuities are not capital assets for tax purpose. Rather, the lump sum is subject to ordinary income tax treatment.

Scams and frauds

Lottery, like any form of gambling, is susceptible to fraud, despite the high degree of scrutiny claimed by the organizers. One method involved is to tamper with the machine used for the number selection. By rigging a machine, it is theoretically easy to win a lottery. This act is often done in connivance with an employee of the lottery firm. Methods used vary; loaded balls where select balls are made to pop-up making it either lighter or heavier than the rest. All balls should be independently verified for materials, size, pressure, susceptibility to magnetism, and other qualities.
The most infamous case of insider lottery fraud was in Maryland in 1979. The Maryland lottery determined its winner by an air blower, where three numbers would bubble up. By injecting fluid into every ball except those numbered 4 and 6, and then buying tickets with every combination of 4 and 6, lottery personnel guaranteed themselves big winnings. There was immediate suspicion that the game had been rigged and the balls were removed for examination. The announcer was arrested and confessed two days later.
In some US States, such as Kansas and Minnesota, losing lottery tickets can be mailed in for a raffle of special prizes. The trouble with that is that employees of stores that sell lottery tickets sometimes collect the lottery tickets that are thrown away and send them in. As a lottery official put it "The retailers have an unlimited supply of free tickets. You do not need to be an FBI agent to realize that is a tremendously unfair advantage."
Some advance fee fraud scams on the Internet are based on lotteries. The fraud starts with spam congratulating the recipient on their recent lottery win. The email explains that in order to release funds the email recipient must part with a certain amount (as tax/fees) as per the rules or risk forfeiture.
Another form of lottery scam involves the selling of "systems" which purport to improve a player's chances of selecting the winning numbers in a Lotto game. These scams are generally based on the buyer's (and perhaps the seller's) misunderstanding of probability and random numbers. Sale of these systems or software is legal, however, since they mention that the product cannot guarantee a win, let alone a jackpot.

References

  • The Lottery Encyclopedia, 1986 by Ron Shelley (NY Public Library)
  • A History of English Lotteries, by John Ashton, London: Leadenhall Press 1893
  • Fortune's Merry Wheel, by John Samuel Ezell, Harvard University Press 1960.
  • Lotteries and Sweepstakes, 1932 by Ewen L'Estrange

External links

lottery in Arabic: يانصيب
lottery in Belarusian (Tarashkevitsa): Лятарэя
lottery in German: Lotto
lottery in Spanish: Lotería (juego de azar)
lottery in Esperanto: Loterio
lottery in French: Loterie
lottery in Korean: 복권
lottery in Icelandic: Getraun
lottery in Italian: Lotto
lottery in Hebrew: לוטו
lottery in Hungarian: Lottó
lottery in Dutch: Loterij
lottery in Japanese: 宝くじ
lottery in Polish: Loteria
lottery in Portuguese: Loteria
lottery in Russian: Лотерея
lottery in Serbian: Лото
lottery in Slovak: Lotéria
lottery in Finnish: Lotto
lottery in Swedish: Lotteri
lottery in Thai: หวย
lottery in Yiddish: לאטערי
lottery in Chinese: 彩票
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