Where Does Lottery Money Go?

Even countries with the strictest gambling laws allow lotteries, often used to fund various charities, but how is that money really distributed?

Once home to the most popular and glamorous gambling destination in the world, America has been surpassed by Asia and Europe in recent years. While Asia prides itself with a thriving casino industry dominated by Macau, Malaysia or Singapore, Europe is betting on its growing online and mobile casino industry.

Neither traditional gambling venue, nor the few internet poker sites in the US have had the success lawmakers were hoping for, but there is one form of gambling that’s still going strong in the country: the lottery.

Well comedian John Oliver is not impressed by it. In a recent episode of his American talk-show “Last Week Tonight” broadcasted by HBO, he said lotteries are sold to the public as charitable foundations, without there being any evidence to prove that these organizations truly have a positive impact on the lives of the regular taxpayer.

The lottery and its mysterious ways

If we take a closer look, in terms of percentage, it looks like Oliver might have a point. almost $60 billion were spent on state lotteries in 2012, and most of that amount was used as prize money and not for some heartwarming charitable activities.

Instead of going towards public education or non-profit organizations, as state authorities have promised, the larger part of that money returns to a few lucky winners. Of course, if there were no prizes, people wouldn’t buy lottery tickets in the first place, but that doesn’t excuse state authorities, who keep emphasizing that lottery money goes towards education and other good causes.

One thing’s for sure: you’ll have a bit of a hard time trying to trace down the money, if you’re curious to find out exactly where it goes. There is little publicly available information to offer you a more nuanced conclusion about the lottery’s financial impact in the 44 states where it is legal under American gambling laws.

Detailed reports on how lottery revenue is spent are even more difficult to find, so unless you somehow manage to come across official, up-to-date information, everything you find has to be taken with a pinch of salt.

Almost $60 billion from lottery tickets

Though this important data might be hard to find, John Oliver pointed out that the Census Bureau does offer some statistics on gross revenue in various states that have lotteries.

For some states, figures are incomplete or have not been kept up to date over the past year. But the available statistics do show how those funds are distributed by the administration, both for prizes and for state funds. And it’s those state funds that Oliver is even more skeptical about.

Some data is missing, but the information collected by the media shows that in 2012, US states have made as much as $59.5 billion dollars in revenue from selling lottery tickets and hosting various lottery games.

Use a little math and you’ll get an average of about $200 per resident. That figure can vary a lot from one state to another. Players living in Massachusetts have spent an average of $671.46 on lottery tickets, while those in North Dakota have only bought $36.12 worth of tickets in 2012.

Who gets what?

About two thirds of the total amount spent is set aside to pay for prizes. Then comes a small 5% fraction, which is offered for the administration to cover salaries and the lottery service’s advertising costs. The rest of the money goes to the state budget.

In all but five states – Delaware, Oregon, Rhode Island, South Dakota and West Virginia – the largest part of the money is allocated for prizes. These five states, however, prefer to distribute more to the state budget.

From here on, everything is a blur. Apart from the fact that winners have received $37 billion in prizes, there are no clear indications on how these states spend the $19.4 billion collected from gamblers who played the lottery.

Without having any more data at hand, the only conclusion one can draw from all these statistics is that state lotteries are very profitable. Unfortunately, most of that profit doesn’t go back to the state and there’s certainly no proof that it is spent on charitable activities or on improving the country’s education.