The lottery is a fixture of American culture, with people spending upward of $100 billion on tickets each year. States promote them as a way to fund education, veteran’s health programs and more without adding to state budgets. But what’s behind the popularity of these games, and how effective they are in raising revenue, is debatable.
Lottery winners can choose whether to take the prize in a lump sum or over several years through an annuity, which allows for a steady flow of cash. In most states, winnings are taxed as income.
The odds of winning are infinitesimal, but that doesn’t deter many people from playing. “Lottery marketing campaigns expertly capitalize on the fear of missing out, or FOMO,” says consumer psychologist Fern Kazlow, who specializes in gambling. “People think that someone else is going to win, and if they don’t buy a ticket, they will be left out.”
The lottery first came to the United States with British colonists in the 1600s, but it wasn’t an instant success. In the 1800s, Denmark Vesey, an enslaved man in Charleston, S.C., won a local lottery and used the money to purchase his freedom. That was the turning point, and the public began to develop “a mixture of religious distaste, moral sensibilities and protections of social welfare and public policy to get rid of lottery systems that were corrupt,” Matheson says. Nonetheless, lotteries continued to grow in popularity, especially after New Hampshire started the country’s first modern lottery in 1909. As other states adopted them, they merged with one another to increase jackpot prizes and attract more players.
