What is a Lottery?

A competition based on chance in which numbered tickets are sold and prizes are given to the holders of numbers drawn at random; sometimes sponsored by a state or organization as a way of raising money. Also called lottery game, raffle, and tombola.

The word lottery is believed to have been derived from Middle Dutch lotinge, which itself may be a calque on the Middle French Loterie, both of which appear in English literature at least by the 1570s. During the early colonial period, lotteries were an important source of both private and public financing. They helped fund the establishment of many private ventures, including the Virginia Company and its early settlements, as well as paving roads, building colleges, libraries, canals, and churches. In addition, a number of lotteries were used to raise funds for the militia and for the colony’s military expeditions.

Today, 44 states and the District of Columbia run lotteries. The six that don’t are Alabama, Alaska, Hawaii, Mississippi, Utah, and Nevada (the latter two have gambling laws that make it difficult to establish a lottery).

Lottery revenues typically expand dramatically following their introduction, then level off and even decline. To maintain and increase their profits, lottery organizers must continually introduce new games to attract and sustain players. They must also balance the prize pool with the cost of organizing and promoting the games, as well as a percentage that goes to profits and administrative costs for the sponsor or state. Winners can choose to receive their winnings in a lump sum or spread them out over time. The former option enables winners to instantly invest or pay off debt, but it could quickly leave them vulnerable to financial disaster if not managed wisely.