Closed-Loop Lotteries

When people hear the word lottery, they probably think of the chance to win big prizes. However, there are other types of lottery where money is awarded to a small number of people who meet certain criteria. These include the ones that determine kindergarten admissions, subsidized housing unit assignments, or the assignment of vaccine research grants. These kinds of lotteries are known as closed-loop lotteries.

The term lottery is derived from the Middle Dutch word “loterie,” which in turn is a loanword of the Latin word loto. The word was also borrowed into English from French in the 15th century.

While state lotteries are often promoted as a way to help the poor and problem gamblers, they raise significant amounts of money. The vast majority of lottery revenue is used to pay out prize winnings and cover operating costs. In some states, this represents as much as $370 for every resident.

Lottery revenues typically expand quickly following their introduction, but then level off and sometimes even decline. Adding new games is the main strategy for maintaining or increasing revenues. The games are designed to be quick and easy to play, and many are low cost.

This focus on attracting low-income players is consistent with the ways that most lotteries are run as businesses, with their advertising centered on persuading people to spend more than they can afford to lose. This approach runs counter to the idea that lotteries are intended to promote public welfare, and it obscures the regressive nature of their operation.