DEFINITION of 'Lottery'

A lottery is a low-odds game of chance or process in which winners are decided by a random drawing. Lotteries can be used in decision-making situations, such as sports team drafts and allocation of scarce medical treatment, but are most commonly used in the popular form of gambling — cash lotteries held by states or multi-states that pay out jackpots to the winners. The financial lottery is a game where players pay for a ticket (usually one dollar), select a group of numbers (or have machines randomly spit out a set of numbers) and win prizes based on how they match the drawn results. The odds of winning this type of lottery are extremely small.


When there is high demand for something that is limited, a lottery may be run to make a process fair for everyone. Some examples include a lottery for units in a subsidized housing block, kindergarten placements at a reputable public school or a vaccine for a fast-moving virus. In the world of sports, the National Basketball Association (NBA) holds a lottery for 14 teams (normally the bottom teams from the previous season) to assign the order of picks. The names of the 14 teams are randomly drawn; the first team drawn gets the No. 1 draft pick, who could single-handedly change the fortunes for his new team.

A cash lottery generates loads of excitement and dreams of throwing off the yoke of "working for the man" for thousands if not millions of people, depending on the size of the lottery prize. The lucky winner of a financial lottery will often have the choice of taking a lump-sum payment or annual installments. The lump-sum choice is attractive to most people because they can get their hands on a big pot of money all at once. Taxes take a significant bite out of the lump sum, but lottery winners do not whine much about having $100 million in cash instead of $180 million. Sometimes a lottery jackpot is shared among two or more winners. The largest jackpot in history that went to a single winner was $758.7 million in 2017. That likely brightened up her world a bit.

  1. Hedonic Treadmill

    A hedonic treadmill is the tendency of a person to sustain relative ...
  2. Gambling Income

    Any income that is the result of games of chance or wagers on ...
  3. Jackpot

    The top prize in a game of chance. Jackpot prizes can be anything ...
  4. Lump-Sum Payment

    A one-time payment for the total or partial value of an asset. ...
  5. Taxable Income

    Taxable income is the amount on which the tax an individual or ...
  6. Annuity Table

    An annuity table is a tool for determining the present value ...
Related Articles
  1. Investing

    The Good And Bad Of National Lotteries

    Here's a look at some of the positives and negatives of national lotteries.
  2. Tech

    Blockchain Technology Allows Anybody to Run a Lottery

    A new start-up called Kibo is using the Ethereum blockchain to create a fully decentralized, verifiably fair online lottery system that anybody can run.
  3. Managing Wealth

    Lottery Winnings: Take the Lump Sum or Annuity?

    If you win the lottery you need to weight the pros and cons of the lump sum and annuity options.
  4. Managing Wealth

    Winning the Lottery: Dream or Nightmare?

    Winning the lottery is both a dream come true and a nightmare. Make sure you account for taxes and other hidden fees when claiming your prizes.
  5. Financial Advisor

    6 Hidden Government Revenue Streams

    You may be well aware of the tax dollars the government withholds from your paycheck, but this isn't the only way your income is being tapped.
  6. Investing

    Why Alibaba's Re-entry to the Lottery Market May be a Big Win

    Alibaba’s recent bet on HK-listed AGTech has far-reaching consequences, beyond just a re-entry attempt in the lottery business in China.
  7. Insights

    Why 'Powerball' Was Google's Top Trending Search Term of 2016

    Why were more people googling Powerball in 2016 than ever before?
  8. Insights

    The Evolution Of The Gaming Market

    The gaming market has a rich history in America, from lotteries in colonial settlements and card games in old west saloons to today's multibillion-dollar casino industry.
  9. Retirement

    Top Tips for Helping Clients Sustain Wealth

    High-net-worth individuals face a number of potential challenges when passing wealth down, but it is possible to build generational wealth.
  10. Insights

    H-1B Visa Lottery Under Scrutiny

    Only a little more than a third of applicants receive an H-1B Visa each year. Immigration groups want to know how they are chosen.
  1. How can I cancel a bank draft that I have purchased?

    Learn about a bank draft, how it works, the circumstances under which a bank draft may be cancelled, and what the cancellation ... Read Answer >>
Hot Definitions
  1. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  2. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  3. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  4. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  6. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
Trading Center