A lottery is a game of chance in which prizes are allocated by a process that relies wholly on chance. It is the most common form of gambling and is central to the theory of expected utility.
In the United States, state-sponsored lotteries are a major source of revenue for public goods and services, including education. The main argument for their introduction is that they allow a state to raise money without increasing taxes or cutting existing programs. Since their inception, they have enjoyed broad popular support, with 60 percent of adults playing at least once a year. Lotteries also develop extensive specific constituencies, such as convenience store operators (who benefit from the sales of tickets); lottery suppliers (heavy contributions to state political campaigns by suppliers are commonly reported); teachers (in states where lotteries’ proceeds are earmarked for education); and state legislators (who quickly become accustomed to a steady stream of tax-free revenue).
Although a history of drawing lots to decide matters of chance has a long record—including several instances in the Bible—lotteries with prizes in material goods are much more recent. The first such lottery was organized in the Roman Empire by Augustus for city repairs. Later, during the Revolutionary War, Benjamin Franklin conducted a lottery to raise funds for cannons for Philadelphia’s defenses against British attack.
Americans spend more than $80 billion a year on tickets, with most of the winnings going to government in the form of taxes and administrative costs. The remaining winnings are distributed to the winners in lump sum or annuity payments, depending on the rules of the particular lottery. Most prize money is allocated to education, with some going to state health and human services programs and business and economic development initiatives, while a small percentage goes toward retailer commissions, operating expenses, gaming contractor fees, and direct prizes.