Lotteries and prize draws are big businesses throughout the world, and entice significant annual investments from individuals who dream of scooping a huge and potentially life-changing cash prize. In the United States, the Mega Millions and Powerball lotteries have become a key feature of monthly consumer expenditures. According to the North American Association of State and Provincial Lotteries, Americans spent a total of $50.4 billion on lottery tickets and video lottery terminals during 2009 alone.

SEE: Is The Lottery Every Worth Your Money?

The profits generated by national lotteries are therefore understandably huge, with a total of $17.6 billion recorded across all participating U.S. states in 2009. This rose even further to $17.9 billion in the financial year of 2010, as Americans invested their hard-earned wages in pursuit of the ultimate cash reward. With the stakes so high and the chances of winning so minimal, however, is participating in the lottery a waste of cash or simply a high-risk investment opportunity that is worth a weekly gamble?

Lotteries in the U.S.
In actual fact, while your chances of winning the lottery anywhere are decidedly slim, the sheer size of the U.S. population and popularity of the game means that American participants must climb an even steeper mountain towards any potential windfall. This was evident for all to see in the formative part of this year, as the nation's Mega Millions jackpot soared to an unprecedented $656 million after being unclaimed for several weeks. When the first winner was announced at the end of March, an estimated 1.5 billion tickets had been sold nationwide.

Now even though this equated to several tickets being purchased per U.S. resident, the odds of each participant winning stood at approximately 1 in 176,000,000. This means that that statistically there was a greater likelihood of being struck by lightning or becoming a billionaire than there was of claiming the Mega Millions jackpot. Americans still invested more than $1 billion into chasing their fanciful dreams of wealth and fortune. This is reflective of a growing trend, where lottery sales continue to soar despite the uncertain economic climate.


SEE: Going All In: Comparing Investing And Gambling

The Argument Against National Lotteries
An interesting consequence of the $656 million Mega Millions jackpot win is that there has been a significant rise in the number of syndicates that are purchasing tickets. This proves that rather than being discouraged by the seeming insurmountable odds of victory, Americans are instead looking for innovative ways to improve their chances and actively investing more into buying tickets. Now, while an estimated one in three global lotteries are won by syndicates, the likelihood of winning remains remote in the extreme, which raises questions about participants and whether they could put their money to better use.

Even for those who win the lottery, their financial future or long-term happiness is not necessarily secured. Acquiring huge sums of money can inspire any number of extreme emotive reactions, and there have been several instances where winning the lottery has triggered a serious decline in lives of individuals and families.

The Benefits of National Lotteries
There are individual state statistics which suggest that the majority of people only purchase lottery tickets when the jackpot has been steadily building over a period of weeks, with just nine to 12% of Illinois residents playing regularly. This would suggest that rather than being symbolic of a growing gambling culture in the U.S., national lotteries are in fact played responsibly and only sporadically by most participants.

Another factor in favor of lotteries is the money that they generate for state funded projects, with public education bodies in particular benefiting from the investment made by participants. With this in mind, people who play the lottery responsibly are contributing towards local community development, which actually means that their small weekly investment at least creates some form of social change. In terms of monetary value, 34 cents out of every $1 spent on lottery tickets is invested into education, with 58 cents being awarded to winners in the form of prizes and 6 cents paid to participating retailers for sales commissions.

The Bottom Line
National lotteries across the globe are always likely to be the subject of extreme opinion and controversy, and not least because players in the U.S. and Europe are looking to invest more during periods of sustained austerity. The fact remains, however, that participants have an individual responsibility to play the game responsibly, and spend within their means while pursuing the dream of huge cash prizes. As long as they do so, then there is no reason why they cannot enjoy the lottery while also contributing to state funded educational projects.

Related Articles
  1. Personal Finance

    Powerball Mania: Take the Annuity?

    Should you win the lottery, you need to decide how to accept your winnings: lump sum or annuity payouts. Here's how to choose.
  2. Savings

    The Lottery: Is it Ever Worth Playing?

    You have better odds of being bitten by a poisonous snake, but that doesn’t mean you shouldn’t play — especially when the jackpot is really, really big.
  3. Stock Analysis

    Effect of China's Slowdown on Gambling Stocks in the US (LVS)

    Find out how the recent market crash in China has impacted the U.S. gambling industry and how big resort stocks such as Wynn Resorts and Las Vegas Sands have fared.
  4. Stock Analysis

    How Las Vegas Sands Corporation Handles Macau (LVS)

    Find out how Las Vegas Sands is weathering the downturn in Macau by maintaining focus on long-term growth and diversified revenue streams.
  5. Stock Analysis

    The Top 5 Entertainment Stocks for 2016 (NFLX, WYNN)

    Discover the top five entertainment stocks for 2016, including one across-the-board winner and three value stocks poised for a comeback.
  6. Retirement

    What is a Lump-Sum Payment?

    A lump-sum payment is a one-time payment for the total or partial value of an asset.
  7. Stock Analysis

    The Top 4 Dividend-Paying Entertainment Stocks for 2016 (SIX, CCL)

    Learn about the top four dividend-bearing stocks in the entertainment industry for 2016 and beyond, including a few solid stocks trading at insane lows.
  8. Budgeting

    Traveling to Las Vegas on a Budget

    Learn how to experience all the Las Vegas glitz and glamour without spending a fortune on travel, lodging, meals and entertainment.
  9. Entrepreneurship

    Top 4 Billionaires Living in Las Vegas

    Learn how Las Vegas billionaires made their fortunes by creating one of the most luxurious tourist destinations in the world in the middle of the desert.
  10. Investing

    4 Gambling Stocks that Outperformed Since 2010 (CHDN, MPEL)

    A look at four stocks in the casino and gambling industry that outperformed the market for the last five years.
RELATED FAQS
  1. What taxes will I pay if I win a lot of money while gambling in Las Vegas?

    Every year, thousands of people travel to gambling hot spots, such as the Nevada cities of Las Vegas and Reno, with the hope ... Read Full Answer >>
  2. What is the difference between a banker's acceptance and a post-dated check?

    Some common financial instruments that speculators use are stocks and financial derivatives. Speculation involves trading ... Read Full Answer >>
  3. What is the difference between speculation and gambling?

    Speculation and gambling are two different actions used to increase wealth. However, the two are very different in the world ... Read Full Answer >>
  4. Is there a difference between the special administrative regions of Hong Kong and ...

    Hong Kong and Macau are the two areas of China formally designated as Special Administrative Regions (SARs) of the People's ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center