You’re not going to win the lottery. To be more precise, your chances of winning Saturday’s $1.5 billion Powerball jackpot are 292,201,338 to 1. If your goal is making money — as opposed to having fun — it’s hard to make a worse bet. Yet 45 state governments would very much like you to believe otherwise.
Each year, states spend more than $600 million marketing their lotto offerings, often through award-winning ad campaigns. (Remember “A Dollar and a Dream”?) An oddity of these ads is that they need not be honest about what they’re selling. In fact, Section 1307 of Title 18 of the US Code quite specifically excludes state lotteries from truth-in-advertising laws.
Unfortunately, what they’re selling is a numbers game with large social costs, persistent inequities and negligible public benefits. A rethink is long overdue.
As a start, state lotteries amount to a regressive tax. Research has shown that poor people play the lotto more often, spend a higher percentage of their income on it, and are about 25% more likely to gamble for money rather than fun. One national survey found that players making less than $10,000 annually spent $597 on average on lotto tickets, or almost 6% of their income. Worse, these expenditures tend to crowd out spending on necessities, such as buying food and paying rent.
One could still argue that adults should be free to make bad decisions. Yet evidence suggests that lotto players have a poor understanding of the risks they’re taking. About a third of participants in one experiment failed to even look at the back of a lotto ticket, where warning information is placed, while only about 20% could correctly interpret their odds of winning. Few players realize that their average return is about 52 cents on the dollar.
Digital advertising will likely worsen these problems. Between 2016 and 2021, the percentage of lottery ad budgets dedicated to online campaigns more than doubled, from 8% to 17%. Lottery agencies say this will help them target likely gamblers, “personalize” marketing pitches and more effectively sell tickets. Another way to put it is that states are getting better at deluding the vulnerable.
It’s true that gambling generates public cash. Nationwide, sales totaled about $95 billion last year. Yet precisely what that income pays for is opaque. Although states typically claim that lottery revenue will be dedicated to education, money is fungible: Such income can simply act as a substitute for general revenue that’s used to plug holes elsewhere — in pension plans, for instance. A significant amount of evidence suggests the benefits for education are usually either small or illusory.
So what should states do instead?
Simply outlawing lotteries is no solution; gambling is fun, most lotto players are responsible, and a free people should be allowed to squander their hard-earned cash as they like. The problem is that state governments have placed themselves in an impossible moral bind: In no other situation would they so actively encourage citizens to engage in a costly and potentially addictive vice.
One obvious step is to crack down on misleading advertising. Although the federal government has little power to intervene, state legislatures should demand that lottery ads are based in fact, don’t target disadvantaged groups, clearly explain the odds of winning, and are otherwise transparent and nondeceptive. Better yet, they could ban such ads altogether. Gamblers would no doubt persist in buying tickets — and thus boost budget revenue — but without the state’s complicity or targeted enticements.
Longer-term, fully privatizing lotteries would make a lot of sense. Gamblers could still gamble, and high tax rates could ensure a strong public revenue stream. But state governments could get out of the marketing business and dedicate themselves to mitigating obvious harms. The odds of this happening are not great — for one thing, Congress would likely need to act — but they’re far better than buying a Powerball ticket.
The Editors are members of the Bloomberg Opinion editorial board.
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