What Is a Lottery?

A lottery is an arrangement whereby prizes are allocated by a process that relies entirely on chance. It may involve a single competition with a fixed amount of money, such as a drawing of lots for houses or apartments, or it may be a series of stages in which entrants pay an entry fee and their names are drawn for each stage. In the latter case, the prize money is usually divided into several smaller prizes, which are allocated by lottery numbers (or other methods). Some states organize state-wide lotteries; others allow local governments to run their own. A lottery can also be used to award public services, such as units in a subsidized housing block or kindergarten placements at a reputable school.

The term lottery is derived from the Latin word loterie, meaning “drawing lots”. It has been in use since ancient times, and the first recorded sign of a state-sponsored lottery is a keno slip from the Chinese Han dynasty (2nd millennium BC). Stated lotteries usually have broad public support. In states that have them, about 60% of adults report playing at least once a year. The lottery business is a multibillion-dollar industry. It is generally a monopoly for the state that runs it; however, it must compete with private firms in order to attract bettors and expand its games. Its costs are often passed up through a chain of sales agents to be repaid by the organization; it deducts a percentage for promotion and operations, and the remainder is available for prizes.

A number of basic elements are common to all lotteries. There must be some means of recording the identities of bettors and the amounts staked; a selection mechanism to choose winners; and a pool from which the prizes are paid. Costs of promoting and organizing the lottery must be deducted from the prize pool, and a percentage normally goes as profits and revenues to the state or sponsor. In addition, decisions must be made about the frequency and size of prizes and whether a balance should be struck between few large prizes and many smaller ones.

A lottery requires extensive promotion to attract bettors and sustain its growth. It must be marketed to the general population and to specific groups, such as convenience store operators, lottery suppliers, teachers in states that earmark some of its revenue for education, and state legislators who quickly become accustomed to the extra funds. Lotteries also tend to develop extensive and specific constituencies within their communities, including a significant number of people who do not play the game but support its expansion into new games, such as keno.