The Dangers of Lottery Fraud


In the United States, lotteries raise billions of dollars each year for a variety of public causes. Many of these are good and laudable, including education, the environment, and crime prevention. But the lottery also carries the potential to be corrupt and exploitative. This is because the winners of a lottery are often people with a history of illegal gambling and credit card fraud, and their winnings may not be all they seem. This is a problem that should worry us all, and it should be a reason to scrutinize state-sponsored lotteries.

The lottery is a form of gambling in which numbered tickets are sold, and prizes are awarded to those whose numbers are drawn at random. State governments have long run lotteries as a way of raising money for themselves and charities. They can be extremely popular. Some people play the lottery on a regular basis, with some playing several times a week and spending $50 or $100 a ticket.

Cohen begins by describing the origins of lotteries in the Low Countries during the fifteenth century, where towns used them to raise money for town fortifications and to help poor people. Lotteries became more widespread in the seventeenth century, when a growing awareness of the enormous sums that could be made in the gaming business collided with a crisis in state funding. With inflation and the cost of the Vietnam War mounting, balancing the budget for many states began to prove impossible without raising taxes or cutting services, both of which were highly unpopular with voters.

To solve the dilemma, legislators turned to the lottery. In most cases, they claimed that the proceeds would cover a single line item in the state’s budget, usually education but sometimes elder care or public parks or aid for veterans. That way, the lottery was presented as a nonpartisan silver bullet that would relieve the pressure to raise taxes or cut popular programs.

The logic behind this strategy was that the more expensive the jackpot, the more people would play the lottery. In addition, to ensure that a given prize amount would be available when the draw occurred, lottery officials bought special U.S. Treasury bonds known as STRIPS (Separate Trading of Registered Interest and Principal of Securities). These zero-coupon securities are not traded on the open market, and therefore their value is not tied to the performance of the underlying assets of the lottery fund, which is guaranteed by the federal government.

Despite the fact that most people know that their odds of winning are slim, the lottery continues to be hugely popular. This is because the dream of a huge windfall is very appealing to most people, especially those with little economic security. The lottery, in other words, is a national obsession. The desire for unimaginable wealth, and the fantasy of a life free of debt and stress, has been a consistent feature of American culture for generations. It is a part of our national DNA.