Why Huge Lottery Jackpots are Increasingly Common

You'll probably have noticed that in the last few years there have been some record-breaking Powerball and Mega Millions jackpots. But why are huge jackpots becoming increasingly common?

In 2016, Powerball reached $1.58 billion, the largest lottery jackpot of all time. It was won on January 13th, 2016 by three tickets from California, Florida and Tennessee. The players chose to share the cash single payment option of $983.5 million. See a list of the biggest Powerball winners.

On October 23rd, 2018, Mega Millions had its own billion-dollar jackpot win when one ticket from South Carolina won $1.53 billion, making it both the largest Mega Millions jackpot ever and the biggest lottery jackpot ever won by a single player.

The winner has chosen to remain anonymous and claimed the prize through her lawyer, who read a statement on her behalf. She chose the cash lump sum payment of a "mere" $877.7 million! Check out the biggest Mega Millions wins.

In fact, every few months on average the jackpots spike to around $400 million to $600 million. These huge jackpots have become - well, almost routine.

A new class of lottery player has emerged: the jackpot hunter. This casual buyer doesn't routinely buy lottery tickets, but when they see the jackpots skyrocketing to hundreds of millions, they just can't resist spending a couple of bucks. After all, someone's got to win!

Powerball has been around since 1992, when it grew out of a previous game, Lotto*America. Mega Millions followed in 1996, when it was known as The Big Game. But the eye-catching jackpots that get people talking around the water cooler are a newer phenomenon.

Recent rule changes are responsible for the impressive jackpot spikes. In October 2015, Powerball lottery officials made some modifications to the game, followed by similar changes to Mega Millions in October 2017.

The result? Jackpots are won less often, so they often grow for months. Once a jackpot reaches a certain level, it tends to grow exponentially. That can lead to record-breaking highs - since the changes were made, four of the six biggest-ever jackpots for both Powerball and Mega Millions have been won.

"Ultimately, these games, they're all about the jackpots," said Gordon Medenica, the director of the Maryland Lottery. He's also the lead director of the Mega Millions Group, a collection of 11 state lotteries that administers Mega Millions.

Why the lottery changes were made

Lottery officials got player feedback that people wanted bigger, more exciting jackpots, while at the same time increasing their chances of winning a smaller prize. Players were tuning out a prize of "just" $100 million, for example, and without more ticket sales the jackpots stayed small.

The lack of a blockbuster jackpot was responsible for ticket sales dropping dramatically. Just between 2013 and 2014, Powerball sales declined 19 percent nationwide and 44 percent in New York, the state with the highest lottery ticket sales. Mega Millions sales also dropped.

By contrast, the current mega-jackpots garner lots of media attention and get folks talking and more importantly, playing. The huge jackpots have become a phenomenon that pulls everyone and their grandma into the game, maybe with a spur-of-the-moment impulse buy at a gas station, or deciding to flick a few dollars into a lottery pool.

Medenica refers to these participants as "infrequent players." Colorado Lottery spokesperson Kelly Tabor calls them "jackpot chasers."

A huge jackpot becomes a feedback loop as a big dollar amount pulls more people in to play, who in turn contribute to the jackpot rising ever-higher and attracting more participants (jackpots "roll over" and increase every time a draw takes place and there's no winner).

At around the $200 million to $400 million range, the jackpot becomes a "cultural phenomenon", says Medenica.

When a jackpot hits half a billion, state lotteries no longer even need to advertise because of the intense media coverage and public interest.

When the jackpot really heats up, even the lotteries' own financial models can't predict what will happen next - the game was in "uncharted territory" in October 2018 when Mega Millions hit $1.5 billion, Medenica said.

What were the changes made to Powerball and Mega Millions?

Powerball players used to pick five main numbers (white balls) from 1 to 59. In October 2015, Powerball added 10 more numbers - players now choose five numbers from 1 to 69. Conversely, the number of red Powerballs decreased, from 35 to 26. This made it harder to win the jackpot, helping it to reach unprecedented levels.

At the same time, the odds of winning smaller prizes increased, and the prizes got more enticing. Powerball upgraded its third-level prize from $10,000 to $50,000. The Power Play add-on to multiply non-jackpot prizes also rose to 10x when the jackpot was under $150 million.

In October 2017, Mega Millions introduced similar changes. In the game's previous formula, players picked five main numbers (white balls) between 1 and 75, plus a Mega number from 1 to 15. In the modified game, players choose five numbers from 1 to 70, and a Mega number from 1 to 25.

Mega Millions also increased the guaranteed minimum jackpot from $15 million to $40 million. The odds of winning the second prize, $1 million, also rose.

The changes were made in response to players' interest in both bigger jackpots and a better chance of winning smaller prizes. "That was the feedback from players. They wanted a better shot at smaller prizes," explained Tabor.

For example, players in Colorado now have a 1-in-38 chance of winning the smallest Powerball prize, $4 - twice the cost of a ticket. The Colorado Lottery also reported an increase in the number of $50,000 and $100,000 winners since the rule changes.

Mega Millions and Powerball produce hundreds of thousands, sometimes over a million, winners in every draw, even when there is no jackpot winner. These smaller wins fuel optimism among players and keep them interested.

Due to the changes, more people are playing the lottery in the last few years. After Powerball made its tweaks in 2015, lottery ticket sales reached their highest level ever, hitting a peak of over $80 billion in 2016. For context, that's more than what Americans spent on books, movies, music, sports tickets and video games - combined. By 2017, lottery sales had dropped a bit, but in 2018 they had bounced back by $5 billion to $77.7 billion.


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