The Biggest Lottery Scam Is The Lottery Itself
Amid a slew of gambling controversies, we have to re-examine the lottery.
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A recent analysis of Federal Trade Commission data showed that between 2020 and 2025, American households lost more than $660 million in lottery-related scams — fraudsters telling people that had won the lottery as a way to bilk them out of their money. Not surprisingly, the data showed that older, less digitally-savvy Americans are those most commonly targeted.
That’s an appalling number, and I don’t expect much in the way of a crackdown since we are living in the scam-apocalypse era. But the biggest scam is not run by any of the fraudsters piggybacking off the lottery, but the existence of the state-run lottery itself. As it becomes abundantly clear that ever-expanding gambling options are having serious negative downstream economic and social effects on our country, states should take the long overdue step of abolishing lotteries, entirely.
As I explained in my book, lotteries in America date back to the colonial era. One was used to raise money for the Jamestown Colony in 1612, and Benjamin Franklin employed one to build a battery of cannons to defend Philadelphia in the 1740s. King George III even banned lotteries in the colonies for siphoning away too many funds that could have gone into the royal coffers.
Post-independence, many U.S. states used lotteries to raise funds for various purposes. They were eventually abolished, though, due to complaints of corruption, fraud, and the power of the U.S. temperance movement, with President Benjamin Harrison in 1890 decrying the “widespread corruption of public and private morals which are the necessary incidents of these lottery schemes.” Congress made it illegal to use the mail to run a lottery; the last one in that era, in Louisiana, shuttered in 1894.
But what is dead in public policy doesn’t usually stay that way, especially when it can raise revenue. The modern lottery began in New Hampshire in the 1960s, with the funds that were raised dedicated to public schools. Since then, nearly every other state has created a lottery to raise revenue that is dedicated to various uses, most often public education.
Lotteries are disproportionately played by the most economically vulnerable people and cause the same negative effects as other addictive activities. They involve the state directly preying on the hopes of the poorest Americans and redistributing funds from poorer communities to richer ones, through explicit public policy.
And make no mistake, the lottery is not simply harmless entertainment, nor is it free of coercion. Lots of research shows that people play out of a belief — a desperation even — that they will become wealthy, and that becomes particularly clear during times of economic distress. Lottery playing increases when joblessness rises, and more than 20 state lotteries set sales records during the Great Recession.
Because states have tied specific programs to lottery funding, they need that desperation, or else lottery-tied funding falls during economic downturns, when other revenues are also going south, leaving states with more holes they need to fill.
Just look at this recent interview with the executive director of the Virginia lottery. Though he pays a lot of lip service to ensuring that Virginians don’t become addicted to lottery games, it’s clear his overriding concern is ensuring that people keep playing even as the state’s economic outlook worsens.
He brings up expanding online games in order to bring in more young players, explains that “offering a mix of gaming experiences and price points helps draw in different kinds of players,” and says he wants to put lottery games into restaurants and bars — because nothing says “we’re taking gambling addiction seriously” quite like giving people easy access to gambling and alcohol together.
And look, I get the concern from a revenue standpoint: 10 percent of Virginia’s public education funding is tied to lottery revenue. But this is the devil’s bargain states have made: They need to keep pushing an addictive, destructive activity in order to keep the money flowing in. Public policy has been crafted to prey on the very people it’s supposed to serve. And often, those funds get pilfered anyway by state leadership, so the programs attached to the lottery don’t even come out ahead in the long run.
In isolation, the existence of the lottery would be a problem, but when combined with the the ever-multiplying other ways in which states are trying to raise revenue via gambling — sports gambling the most prominent among them — there’s the potential for a real catastrophe. I can’t really undersell how ugly it’s getting out there, with states trying to one-up one another in a desperate attempt to keep gambling dollars within their borders.
There’s even one company called Kalshi attempting to obliterate all state-level restrictions on gambling by arguing — absurdly, to be clear — that sports betting is just a financial instrument that can only be policed at the federal level by an industry-corrupted regulator. Draftkings, one of sports betting’s ruling duopoly, is making a similar play, acquiring a federally-regulated “prediction exchange” to get into a space that supposedly will help it evade state regulations.
The rot caused by widespread sports gambling has already hit professional leagues and college sports, and is making life miserable for athletes, ruining the finances of players, and foisting costs onto the public. If states try to run a similar play with the lottery, and it seems to be they might with their talk of more online options and addictive gaming interfaces, it’ll even more deeply implicate policymakers in the destruction.
I know the revenue is hard to give up, but the right thing morally and for long-term fiscal government health is to abolish the lottery and rase money from something else. Vermont this year had a bill to do just that. Other state legislators should follow suit.
SHAMELESS SELF-PROMOTION: I talked to NBC News about the use of non-disclosure agreements in data center development deals. Read it here. Also, kudos to the editor who properly framed up the story with this headline:
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
Speaking of data centers and NDAs, there’s a controversy brewing on the subject in St. Louis County, Minnesota.
Why states should decouple from the corporate tax breaks adopted in this year’s federal budget.
The Pennsylvania Senate is working on legislation to fast-track permits for corporate projects that receive state subsidies.
The Pennsylvania House, meanwhile, is working on legislation to protect monopoly utility customers from cost increases tied to data center development.
The former head of the Antitrust Division at the Department of Justice says data center power use will be a major antitrust issue.
A prescription drug affordability board in Colorado will cap the cost of Enbrel, an arthritis drug, starting in 2027. (Read my argument for why these boards are ultimately ineffective here.)
The Missouri Secretary of State is cooking the language of a ballot amendment seeking voter approval of public funding for a new Kansas City Chiefs stadium.
Hospitals spend twice as much on administrative costs as they do on patient care.
A new study shows that homebuilder consolidation leads to higher home prices and lower construction quality.
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— Pat Garofalo
Excellent article.