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Where Does Lottery Money Go? An Economic Investigation

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Where Does Lottery Money Go? An Economic Investigation

Did you know that the average American spends more than $200 every year playing the lottery? From buying Powerball tickets to purchasing scratch-offs, people spend money on the lottery in many different ways.

This results in the U.S. as a whole spending over $70 billion per year playing the lottery. Almost everyone gets in on the action at some point, especially now that some lottery drawings are for over $1 billion.

This might lead you to ask one very simple question: Where does lottery money go? As in, where do all the billions and billions of dollars that people use to buy lottery tickets end up?

Let’s take a look at some of the places where lottery money goes once a lottery drawing is over.

Lottery Winners

When you ask the question, “Where does lottery money go?”, people might scoff at you at first and say, “Um—duh!—the lottery winners, right?!”

To some degree, these people are obviously right. A sizable percentage of the money that’s generated by any lottery is given to the person or the people with the winning lotto numbers in their hands.

But in most cases, lottery winners do not walk away with the entire pot after winning a lottery drawing. They often collect somewhere between 50 and 60% of the proceeds of a lottery when they win.

Lottery Retailers

If you want to buy a lottery ticket, it’s not difficult at all to do it. There are more than 200,000 lottery retailers located all across the country.

You can buy lottery tickets at convenience stores, restaurants, and other places of business. Many retailers use them as a way to bring more people through their front doors.

Retailers also use them as a source of revenue if they’re able to sell enough tickets and if they’re able to sell jackpot-winning tickets.

The lottery system is designed to give retailers a small cut of the action in the form of a commission when they sell a ticket. It’s also designed to give them a large bonus if they’re ever fortunate enough to sell a ticket that wins a big jackpot.

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Administrative Costs

The various lotteries that take place on both a national level and on state levels don’t happen by themselves. There are lots of hard-working people who put a lot of time into pulling these lotteries off and making them as successful as they are.

All of these people are paid for their services out of some of the profits that the lottery brings in. There are also other costs associated with running the lottery that must be taken care of each year.

Lottery money is used to pay for:

  • Advertising
  • Legal fees
  • Lottery ticket supplies

The administrative costs that come along with running the lottery aren’t astronomical by any stretch of the imagination. But they do need to be accounted for by the organizations that are in charge of staging lotteries.

States

At this point, lottery money has been used primarily to cover the basics. From paying lottery winners to taking care of administrative costs, you probably haven’t been too surprised to see how lottery money is spent.

But this is where things get interesting. Once all of the other expenses are gone, there is a pool of money left over that is then divided up among the states that participate in a particular lottery.

This money is often given out based on a system that calls for those states that sell the most tickets to collect the most money. But it all depends on which lottery you’re talking about.

At any rate, states can then use the lottery money that they receive to do, well, just about anything they want!

There are some states that take it upon themselves to use lottery money to set up gambling addiction programs. There are others that devote a significant portion of their lottery money to improving education.

Some states have taken lottery money and utilized it to restore historic buildings and make their states look better. And there are even states that have started using lottery money to bring taxes down for people.

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States are responsible for finding the best ways to spend their lottery money. They aren’t shy about coming up with creative ways to put it to good use.

What About Unclaimed Funds?

If you can believe it, there are quite a few lottery winners who never come forward to collect their money for one reason or another. Some don’t realize they’ve won the lottery and throw their tickets away, while others lose their tickets before they have a chance to collect on them.

Because of this, there is about $2 billion worth of lottery money that is left unclaimed each year. This lottery money is essentially left in limbo while lottery officials wait to see if anyone steps up to claim it.

People often have a certain amount of time to collect lottery winnings. Once that time is up, unclaimed funds are sent back to the states that helped contribute to a jackpot in the first place.

The states can then use the lottery money as they see fit once it’s back into their possession.

So Where Does Lottery Money Go? As It Turns Out, All Over the Place!

People play the lottery to give themselves a chance to win a life-changing amount of money. But in the process, they might also be helping their states to make much-needed improvements.

The next time you find yourself asking, “Where does lottery money go?”, remember that it goes to lottery winners and retailers. But remember that it goes back to the states that take part in lotteries, too.

That money is then used to do some good in the states. Whether that means setting up a new program or funding some kind of project, states have found important ways to use lottery money over time.

Would you like to give yourself a better opportunity to bring some lottery money in your direction? Check out the other articles on our blog for tips on playing the lottery.

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