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.

BREAKING DOWN 'Lottery'

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.

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