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Where does money spent on lottery tickets really go?

Mon 18 Jan 2016, By Jerry Westford
a detailed look at how a lottery ticket purchase is reallocated after purchase

When you purchase a lottery ticket, where does your money really go? That's a question many have asked, as we're mostly unsure of where our hard-earned and well-spent money is going towards, be it charity, back into the lottery, or other avenues.

Firstly, most of the money goes right back into the lottery winnings, as this enables the jackpot to increase. For the US Powerball, total lifetime sales (since 1992 until today) have been in the region of $56 billion.

From that, over $16.5 billion has been paid out in jackpot winnings. Smaller wins (those tickets that didn't hit the jackpot) totals $11.8 billion. So right there, over 50% of the money from your ticket purchases is automatically seeded back into the winnings.

Next, any profit on top of these sales (such as from taxes) is kept by the state the lottery ticket is purchased in. This helps the state to pay for the salaries of the lottery workers, the upkeep of the lottery machines and so on.

As for education, many have been unsure of the exact allocation. Many believe that number is a mere 10% or 15%, when in reality 29 cents of every dollar spent on the lottery is allocated to education. For instance, the Michigan Lottery donated $740 million to government schools in 2015. In the case of the current US Powerball draw, the lottery will donate over $2 million to schooling. The remainder of the monies goes to administrative costs.

And in a surprising turn, it's not even the US Powerball or US Mega Millions that make the most money for the lottery. This only accounts for 10% of all earnings for the lottery group. It's the instant games or scratch cards that make up 35% to 40% of all lottery earnings.

Different states in the U.S. will use the money it earns from its state lotteries in ways that benefit it, such as Colorado, which uses a large portion of its lottery earnings to pay for its parks and recreation projects. Arizona uses its money for a heritage fund and improving its transportation, while Florida has churned out many tertiary graduates thanks to its scholarships, made possible by the state lottery. So when a state says that it's contributing its lottery earnings to "education", that could actually mean a variety of applications outside of the scope of schooling.

Discussing all the earnings for every national lottery game and where it is allocated is far beyond the scope of this article. Thankfully, every national lottery in every country has a detailed list of how it spends its earnings, therefore we highly suggest you search online for the specific lottery you wish to learn more about.