Time to privatize the lottery

Many state governments run lotteries, claiming that this revenue-raising service is good for communities.  But these programs advertise under false pretenses in order to exploit the poor.  It’s time they were abolished.

States currently use lotteries to bring in $68 billion per year in revenue, functioning essentially as a regressive tax. 61 percent of people in the lowest income quintile gambled in the past year, compared to 42 percent for the upper three quintiles.  Poorer citizens tend to gamble more, even though they can least afford to. Gamblers in the lowest income quintile gambled over 150 percent more than those in the highest quintile.

{mosads}In fact, state lotteries are largely funded primarily by addicts.  In 2009, a majority of the Oregon lottery’s revenue came from only 10 percent of users, who lost an average of $500 per month to the lottery.  An Iowa lottery media plan noted among its goals, “target[ing] our message demographically against those that we know to be heavy users.” In the 1990s, the Colorado lottery spent $25,000 on a study in order to “understand how to manipulate player behavior.” 

6 to 8 million adults in America are “pathological gamblers” or “problem gamblers.” Gambling addiction is neurologically on par with substance addiction.  These are people the state should be helping, not exploiting. 

Some may argue that lottery programs are relatively benign because they’re a means of voluntary revenue raising. The problem is that states typically lure gamblers in under false pretenses. State lottery commercials often claim that gambling is for a good cause because it helps fund education. This claim is fraudulent for two reasons.  First, relatively little of the revenue from lotteries actually goes to the state.  Nationwide, only 34 percent of lottery revenues are returned to the government. 

Second, the money that does go to the state is fungible. Gambling revenue often gets plugged into holes throughout the state budget.  If, for instance, gambling brings in $100 million for education, state legislatures often move another $100 million that would have gone into education into a different program.  This means that in many cases, state lotteries don’t fund any one program—they fund government as a whole.  Yet, lotteries are still marketed deceitfully to prey on peoples’ desire to fund something they consider noble.

State lotteries also mislead buyers about the odds of winning and the payoffs of a win. Jeff Perlee, former Director of the New York State Lottery, noted that some advertisements by state lotteries “are so far-fetched and so fanciful that they would not stand up to the same ‘truth-in-advertising’ standards to which advertising conducted by private industry is held.”  In fact, state lotteries are explicitly exempt from truth in advertising laws.

The solution is not to ban gambling altogether; denying peoples’ liberties is morally troubling and often ineffective, as alcohol prohibition of the early 20th century well demonstrated.  Rather, state governments should get out of the gambling business altogether.

If people wish to gamble, they should be allowed to, just as they are allowed to drink.  However, the demand for gambling should be satisfied exclusively by private businesses.

Private lotteries are less exploitative than state-run programs because companies are by nature up-front about where their revenue is going: it’s going to pay expenses, make a profit, and expand operations.  When you spent $1 at a private casino, you know exactly where your money is going.  The casino cannot lure you in under false pretenses by promising to give your dollar to charity and then pocketing it instead. 

Additionally, private lotteries must be open about factors such as the odds of winning and the payoffs of winning big. Companies, unlike government organizations, are legally bound by truth in advertising laws.  If they behaved the way state-run lotteries do, they would be sued for fraud.

Government-run lotteries, however, are not going to be sued for fraud any time soon. If history is any guide, they will continue luring customers in under false pretenses, robbing the poor and creating more income inequality, until they are outlawed.

Adorney is a Young Voices Advocate and freelance writer living in Colorado.