What's behind the recent streak of billion-dollar jackpots in lotteries?
AYESHA RASCOE, HOST:
A ticket holder in Maine is $1.35 billion richer today after winning the Mega Millions drawing Friday. It was the fourth largest lottery prize in U.S. history and the third billion dollar-plus jackpot in just the past six months. So what's going on with these huge prizes here? We spoke earlier with Victor Matheson, economics professor at the College of the Holy Cross and a lottery expert. And I started by asking him why jackpots are getting bigger.
VICTOR MATHESON: Over the past 10 years, both of the big nationwide lotteries - so there's two of them. There's Mega Millions and then there's Powerball. They have both made intentional changes that have made the jackpots bigger and bigger over time because that's what they think is going to generate the huge sales. And of course, they're all about maximizing the amount of revenue that they're generating for the lottery, and, of course, from that, the amount of money they're generating for state governments.
RASCOE: So tell me about the changes that they made. Like, what did they do to make these jackpots bigger?
MATHESON: So there's three big things that happened, OK? So the first one is about 10 years ago, actually back in 2010, these big national lotteries kind of called a truce and said, hey, instead of having half the nation divided into one lottery and half into the other, let's just allow tickets to be sold in every state in the nation. So this effectively makes both Powerball and Mega Millions a nationwide lottery. Almost every state offers this, all but five states. And that means there's 300 million potential ticket buyers out there, which means money can accumulate into that jackpot pretty quickly. So that's number one.
The second thing that both of these lotteries have done is, first of all, both of them have made the lotteries $2 instead of $1. That effectively means money gets put into that jackpot pool twice as quickly. So the amounts that - these jackpots basically accumulate twice as fast as they used to. And then the last thing that they've done is they've made the lottery harder to win. Both of these games are about one in 300 million chances, right? This is wildly improbable that you're going to win. But it also means that it's likely that in any given drawing, the jackpot rolls over to the next drawing.
RASCOE: I guess when the lottery gets into a big number, like a billion, you're going to get probably more people wanting to get a piece of that, to try to get a chance at that, right?
MATHESON: Right. That's exactly why the lottery has been designed and engineered to generate these huge jackpots, because, you know, this is what really generates the excitement and the buyer interest. So for Friday's $1.35 billion jackpot, we probably had about $500 million worth of tickets sold for that drawing. That is roughly 20 times the number of tickets that is sold when the jackpot's at a mere, you know, $10 million.
RASCOE: So can you break it down for me? Like, you know, if I buy a $2 ticket, like, where does all the cash go?
MATHESON: So some of it goes to the retailers. So out of that $2 ticket, $0.10 goes to the outlet that sells the ticket - right? - so your 7-Elevens, your convenience stores, your gas stations. Next, you have money going into the prize pool. So out of that $2, about a dollar goes to prizes. The rest of that, about $0.10 of it, goes into administration, advertising, you know, just running the show, which means that you're left in the end with about $0.70 or so, $0.80 or so, going to the state governments. Depending on what state you're in, that may just go to the general fund to spend anywhere you want. Some states, for example, North Carolina and Georgia, designate it towards education. Other states like Colorado specifically put it into parks and recreation.
RASCOE: And what about addiction? Like, you know, with jackpots going up, is there a worry that people will get more into the lottery because they're seeing, oh, a billion dollars? You know, is that a concern?
MATHESON: Absolutely. So gambling addiction is something we should always be concerned about. For the vast majority of people, buying lottery tickets is exactly what it's supposed to be. It's an entertainment product. You know, $2 is a small price to pay to dream about what you would do with a billion dollars. But for a small portion of the population - and different measures differ about how addictive this product is, but somewhere between, say, 0.5% and 5% of the population has real difficulty with gambling and it becomes addictive. And they meet the criteria for problem gambling. Every state that has legalized a lottery has allocated at least some portion of those lottery proceeds towards problem gambling. And it is clearly a problem for a small but significant number of people.
RASCOE: Victor Matheson, economics professor at the College of the Holy Cross in Worcester, Massachusetts. Thanks for coming on.
MATHESON: Well, thank you for having me. And I hope your numbers have come up right. Transcript provided by NPR, Copyright NPR.