History of the Lottery in the United States
When did the lottery start in the U.S.? It’s been a part of life since at least 1776, when the Continental Congress voted to use a lottery to raise money for the War of Independence.
Although the idea didn’t end up being used, lotteries were a popular way to raise funds in early America for expenses like paving roads, building wharves, and even constructing churches.
No one invented the lottery in America, because it was already used in England and spread to the New World. In fact, the Jamestown colony was partly financed by private lotteries in the 1600s.
A number of the Founding Fathers promoted lotteries, mostly unsuccessfully.
In 1768, George Washington held a lottery to fund building the Mountain Road in Virginia, but it failed.
Benjamin Franklin also unsuccessfully tried to use a lottery to buy cannon to defend Philadelphia during the Revolutionary War.
Thomas Jefferson was also a fan of lotteries. “Far from being immoral, they are indispensable to the existence of man,” he wrote. In 1826, the Virginia legislature gave Jefferson permission to conduct a private lottery to pay off his many debts. He died before it could be held, but it was unsuccessfully attempted by his children.
John Hancock was the exception to the rule, successfully using a lottery to finance the rebuilding of Faneuil Hall in Boston after it burned down in 1761.
Lotteries were widespread in the early American republic. In 1832 it was reported that 420 lotteries had been held in eight states in the last year.
Lotteries also helped fund many college buildings, including at Columbia, Dartmouth, Harvard, and Yale.
After the Civil War, the Southern states used lotteries to finance Reconstruction. However, corruption by the private lottery organizers led to increasing opposition.
In 1868 Congress outlawed the use of the mail for lottery advertising “or other similar enterprises on any pretext whatsoever.” In 1878, the Supreme Court decided that lotteries had “a demoralizing influence upon the people.”
The Louisiana lottery leads to ban
However, the most successful lottery in the country continued to flourish. The Louisiana lottery was privately run by the Louisiana Lottery Company. At its height it was estimated to achieve sales of over $20 million per year. Prizes in the monthly drawings went up to the princely sum of $250,000, and twice a year special prizes could rise to $600,000.
The company had agents in every U.S. city, and 93% of its revenue came from out of state. Special trains were needed to transport the huge volume of mail, including thousands of ticket receipts, sent to the company’s headquarters in New Orleans.
The company gained a monopoly as Louisiana’s lottery provider in 1868 through the extravagant bribes paid by its founder, Charles T. Howard. In exchange it was allowed to keep all lottery proceeds tax-free.
Howard became a very powerful figure in Louisiana, although he wasn’t popular with everyone. The Metairie Jockey Club wouldn’t let him become a member, so when their racecourse ran into trouble, Howard purchased it and turned it into a cemetery - where he is buried in a huge tomb.
Despite paying thousands in bribes, the company still made an impressive 48% profit. One reason for this was that if there were unsold tickets before a drawing, they were put into the barrel the winning numbers were drawn from (the drawings were overseen by two former Confederate generals, Jubal Early and P.G.T. Beauregard). In many cases, this trick led to the company winning its own prize money.
In 1890, the lottery’s charter was up for renewal, and company officials bribed lawmakers to put the lottery in the state Constitution. However, this required a public vote, and furious citizens rejected the amendment.
The federal government had also had enough. President Benjamin Harrison denounced lotteries as “swindling and demoralizing agencies” and Congress banned sending lottery tickets by mail or taking them across state lines, finishing off the lottery.
As the abuses of the Louisiana lottery became known, they caused a huge national scandal and the public soured on lotteries.
States legalize lotteries in the twentieth century
Opinion on lotteries began to soften again during the early twentieth century, especially after the disaster of Prohibition, which ran from 1920-1933 and involved widespread organized crime related to illegal alcohol operations.
Nevada made casinos legal in the 1930s, and betting to benefit charity became more widespread throughout the country. However, the lingering memory of the Louisiana scandal kept lotteries from gaining public support for another thirty years.
In 1963, the New Hampshire legislature allowed a sweepstakes to raise money for education. The funds were badly needed because the state had no income or sales tax to finance educational programs.
Based on the popular Irish Sweepstakes, a ticket cost $3 and the winners of horse races at the Rockingham Park racecourse determined the biggest prizes. Despite the drawings not being held regularly, almost $5.7 million worth of tickets were sold in the first year.
Not to be outdone, New York started its own lottery in 1967. It proved spectacularly successful, bringing in $53.6 million in its first year. Just like today, residents of neighboring states without lotteries were tempted to cross the border to buy tickets.
The success of the New York lottery didn’t go unnoticed, and twelve more states introduced their own lotteries in the 1970s – Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, Rhode Island and Vermont.
Why was the Northeast such fertile ground for lotteries? There seem to be three reasons.
First, the states needed money but didn’t want to take the always-unpopular step of raising taxes.
Second, each state had a large Catholic population that widely tolerated gambling.
Third, there was a domino effect: a state is much more likely to start a lottery if a nearby state already has one. The governor of North Carolina, Michael Easley, expressed a popular view when he promoted a lottery by saying, “Our people are playing the lottery. We just need to decide which schools we should fund, other states' or ours.”
Most lotteries in the 1970s were extremely slow-paced by today’s standards. In 1974, Massachusetts introduced the first instant win game using scratch-off tickets, but the majority of lotteries were “passive drawing games” - basic raffles where tickets printed with a number were sold. Players often had to wait weeks for a drawing, so the suspense must have been intense!
In the 1980s the lottery boom intensified, with seventeen more states plus the District of Columbia taking part: Arizona, California, Colorado, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Missouri, Montana, Oregon, South Dakota, Virginia, Washington, West Virginia, and Wisconsin.
Lotteries have come a long way from the 1960s – so what types of lotteries are there? They come in a variety of forms, from the instant-win scratch-off cards to multi-state draw games like Powerball and Mega Millions.
There’s something to appeal to every kind of player, whether you want instant gratification, more chances to win, or the potential for a bigger prize.
Research shows that the majority of the U.S. public approves of lotteries. Even many people who don’t buy tickets themselves still have a positive view. In a 2014 Gallup poll, 62% said gambling is “morally acceptable.” State lotteries are the most common type of gambling in the country, with about half of those polled saying they had bought a lottery ticket in the past 12 months.
Which states have the lottery today? Currently, there are only five states that do not have lotteries: Alabama, Alaska, Hawaii, Nevada, and Utah.
Alabama could be the next state to introduce lotteries, and there are also persistent attempts to pass a lottery bill in Hawaii. In the past, Alaska had enough oil money that it didn’t need a lottery, but views about an Alaska lottery may be changing since the state has recently been short of revenue.
How much money does the lottery make a year?
In 2017 Americans spent $73.5 billion on lottery tickets. That’s about $230 per year for every person in the country, which is an increase from the previous year. The total increases to $80 billion when electronic lottery games are counted.
The state with the highest lottery revenue was New York, which took in $8,344,023,000 in 2016.
So it’s no surprise that there are only a handful of states and territories without lotteries, because the lottery is a big benefit to state budgets. It’s an attractive way to raise money without raising taxes.
Lotteries are accepted by the public where they have been introduced as long as they contribute towards the common good, such as education programs and college scholarships.
Lottery proponents argue that states like Alabama lose a lot of money from residents who cross the border into neighboring states to buy lottery tickets.
Lottery retailers near the border in states like Florida or Louisiana do a roaring trade, especially when there’s a big Powerball or Mega Millions jackpot.
The argument that the money could be spent locally instead and benefit good causes in-state is persuasive to many residents.