A lottery is an arrangement in which one or more prizes are allocated to people by chance. Prizes can be cash, goods or services. The arrangement is usually run by a government or by private companies regulated by the state. In the United States, federal statutes govern the operation of lotteries. These laws prohibit the mailing or transportation in interstate commerce of promotional material for lotteries.
The practice of making decisions and determining fates by casting lots has a long history, including many instances in the Bible. The modern practice of distributing property or money by lot is much more recent. Public lotteries began in the 15th century, with records of them found in Bruges, Ghent, and Utrecht, although the first known to distribute prize money was probably in 1445 at L’Ecluse, for town wall repairs. Private lotteries, such as those for playing cards, are even older.
In modern times, lotteries are popular as a means to raise funds for public good projects. The lottery is often portrayed as an alternative to raising taxes or cutting popular programs, and it has won wide support from voters. The state governments that sponsor lotteries generally require their citizens to approve the idea in a referendum before it can be implemented.
Lottery advocates emphasize that proceeds benefit a specific public purpose and do not come out of the general fund. This argument can be effective in times of economic stress, when voters are fearful of tax increases or program cuts. It is less effective, however, when the state government is in a healthy financial position. The popularity of lotteries is also independent of the actual benefits they provide.
When a state adopts a lottery, it establishes an organization to run the operation and a board of directors to govern it. The board members are elected and appointed, often for a four-year term. Most states also set a minimum size for the prize pool and a percentage of ticket sales that must be reserved for prizes, with smaller prizes being offered for more tickets. Lottery revenues typically grow rapidly when the lottery is first introduced, then level off and sometimes begin to decline. The decline has prompted the development of new games such as keno and video poker to maintain or increase revenues.
The ongoing evolution of the lottery is a classic example of public policy made piecemeal and incrementally, with little consideration for the overall state budget or the implications of a new source of revenue. The development of the lottery demonstrates how it is possible for the interests of politicians and voters to overwhelm broader considerations of what is best for the country. This dynamic is also evident in the way that state budgets are developed and in the ways in which state officials spend those funds. The resulting problems are numerous and varied. They range from the problems of compulsive gambling to alleged regressive effects on low-income populations. They also include the tendency to fund state programs with a large percentage of proceeds from the lottery, which makes those programs less responsive to budgetary pressures.