Lottery Definition

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What Is a Lottery?

A lottery is a low-odds game of chance or process in which winners are selected by a random drawing. Lotteries can be used in decision-making situations, such as sports team drafts and the allocation of scarce medical treatment.

Lotteries are also a popular form of gambling, encouraging people to pay a small sum of money to be in with a chance of winning a big jackpot—often administered by state or federal governments.

Key Takeaways

  • A lottery is a game of chance or a process in which winners are selected at random.
  • Lotteries can be used in sports team drafts, the allocation of scarce medical treatment, and other decision-making situations.
  • Some of the more popular lotteries are financial, with participants betting a small sum of money for the chance of winning a big jackpot.
  • While financial lotteries have been criticized as an addictive form of gambling, sometimes the money raised is used for good causes in the public sector.

Understanding Lotteries

A lottery refers to a random draw, which results in a winner or small group of winners. When there is a high demand for something that is limited, a lottery may be run to make a process fair for everyone.

Some examples include a lottery for units in a subsidized housing block or kindergarten placements at a reputable public school. Two common, popular examples are those that occur in sports and those that dish out big cash prizes to paying participants.


In the world of sports, the National Basketball Association (NBA) holds a lottery for the 14 teams with the worst record from the previous season that did not make the playoffs. The names of all 14 teams are randomly drawn in order to determine which draft pick they will have. The team that comes out top is essentially given the first opportunity to pick the biggest talent out of college.


The financial lottery is a game where players pay for a ticket, usually for $1, select a group of numbers, or have machines randomly spit them out, and then win prizes if enough of their numbers match those randomly drawn by a machine.

The lucky winner is often presented with the choice of taking a lump-sum payment or annual installments. The former option is usually the most popular, although sometimes receiving the proceeds over several years via an annuity can make more sense, especially for taxation purposes—in most states, lottery wins are subject to income tax.

The largest jackpot in history was $1.586 billion, which was shared between three winners Jan. 13, 2016.

The total value of prizes is generally determined by the amount raised after the promoter takes out their expenses. That said, there are also some lotteries that offer predetermined prizes, meaning the promoter's ability to cover expenses and generate a profit depend on how many tickets have been sold.

Advantages and Disadvantages of a Lottery

A cash lottery generates loads of excitement and dreams of throwing off the yoke of "working for the man" for thousands, if not millions of people, depending on the size of the lottery prize.

Lotteries have been criticized in the past for being an addictive form of gambling. Though tickets are not usually expensive, costs can rack up over the years, and the chances of winning are very slim—statistically, there is a greater likelihood of being struck by lightning or becoming a billionaire than winning the Mega Millions jackpot.

Moreover, those lucky enough to acquire the vast sums of money on offer can sometimes find themselves worse off than before. There have been several cases where winning the lottery has triggered a serious decline in the quality of life of individuals and families.

On a more positive note, proceeds from lottery ticket sales do sometimes go to good causes. Each state tends to donate a percentage of revenue generated. Often money raised will be spent in the public sector on things like education, park services, and funds for veterans and seniors.

Lotteries are a good way to raise money as they are simple to organize and popular with the general public.

The History of Lotteries

The origins of lotteries can be traced back to centuries ago. In the Old Testament, Moses was instructed to take a census of the people of Israel and then divide the land among them. Meanwhile, Roman emperors reportedly used lotteries to give away property and slaves.

Lotteries were later brought to the United States by British colonists. The initial reaction was mainly negative, particularly among Christians, with ten states banning them between 1844 to 1859.

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