Lotteries, Revenues and Social Costs
Introduction
- In 1948, legal lotteries were nonexistent in the U.S.; however, by 1992, 33 states and D.C. had official state lotteries.
- Lotteries provide revenue and prevent outflow of money to other states with gambling.
- State involvement in gambling contrasts with anti-lottery provisions, anti-gambling statutes, and related policies.
- There are concerns that lotteries disproportionately affect low-income individuals, who seek financial solutions.
- Historically, lotteries were common in America for raising revenue for public works, but were abandoned due to fraud and social problems.
- In 1893, lotteries were considered a dangerous source of misery, leading to federal prohibition.
- Lotteries have resurged, leading to increased problem gambling and associated issues.
- This paper examines gambling regulations, the social impact of lotteries, and suggests ways to minimize adverse effects.
A History of Gambling and Gambling Regulation
- Gambling is an activity that has existed since the dawn of recorded history.
- Governments have historically struggled between using gambling for revenue and controlling its social ills, leading to cycles of promotion and prohibition.
The Definitions
- Gambling originates from the Middle English word "gamen," which means to amuse oneself.
- Gambling comprises three elements: consideration, chance, and reward.
- Lotteries epitomize these three elements, involving the sale of chances for a prize determined by random draw.
- Consideration Example: cost of the ticket.
- Chance Example: Numbers are randomly selected.
- Reward Example: The prize.
- Sweepstakes typically avoid being classified as lotteries by not requiring a purchase (consideration).
The Regulation of Gambling
- Some believe gambling stems from a psychological stimulus intrinsic to human nature.
- Gambling has been widespread across civilizations, dating back to ancient Egypt (circa 2500 B.C.).
- Governments have regulated gambling for extended periods, with records from India indicating regulation as early as 321 B.C.
- Historical regulations:
- 1190: Richard I and Phillip of France controlled gambling in the Christian Army.
- 1388: King Richard II directed laborers to focus on archery instead of games like dice.
- 1477: Edward IV added new games to the prohibited list.
- 1494: Henry VII created an exception allowing games to be played at Christmas time.
- 1541: King Henry VIII consolidated gambling law, seeking to increase military preparedness and control debauchery by prohibiting laborers and servingmen from playing certain specified games, except at Christmastime while in their masters' houses.
- 1603: The Case of Monopolies changed gambling regulation, making all games legal unless expressly prohibited by legislature.
- Subsequent legislation focused on controlling fraud and limiting wager amounts.
- 1661: Statute of Charles II targeted fraudulent/excessive gambling to protect the "younger sort."
- Victims of cheating could claim triple the losses, shared with the Crown.
- Gambling debts over £100 secured on credit were legally unenforceable.
- 1699: William III outlawed lotteries due to fraudulent practices and exploitation of vulnerable individuals, although some charitable lotteries were permitted to continue.
- English gentry were disrupted by British gambling, resulting in the large transfers of property.
- 1710: Queen Anne signed the Statute of Anne, preventing large transfers of wealth by making gambling debts of £10 or more unenforceable.
- The Statute of Anne became part of the law of every state in the New World.
The Development of Lotteries
- Lotteries likely began as simple games at festivals, later recognized for profit potential.
- Government-sponsored lotteries became common in Europe from the sixteenth century onward as a way of economic funding and growth.
- Lotteries are well suited to government control because their profitability is enhanced by monopoly power and wide coverage.
- Lotteries are recession-proof and a popular means of raising revenue.
Early European Lotteries
- Early commercial lotteries were conducted by merchants to sell excess goods.
- European governments recognized potential in state-run lotteries in the sixteenth century.
- Belgium possibly had the first lottery for public benefit in the 15th century.
- Lotteries spread to Italy, France, England, and America.
- From 1709 to 1826, the English government conducted annual lotteries for revenue generation.
- 1808: A select committee reported to Parliament that lotteries lead to increased idleness, dissipation, and poverty. The Select committee also found that the lottery led to instances where domestic comfort is destroyed; madness often created; crimes common; and even .suicide is produced.
- England abolished lotteries in 1823.
- Voltaire and Claude Monet were notable lottery winners.
- Voltaire was a brilliant mathematician who noticed a miscalculation in the government's lottery plan, so he formed a syndicate that purchased every ticket. His share of the winnings gave him the independence to pursue his writing.
- French artist Claude Monet won 100,000 francs in the 1891 French National Lottery and from his winnings was then able to completely devote himself to his art.
Early American Lotteries
- The New World's first gambling laws were drafted by the Puritans, designed to attack the unproductive use of time—idleness, not gambling in and of itself.
- The Puritans did not view gambling as inherently evil, lots were forbidden because they had been invoked in the Scriptures to reveal God's will as to matters of great importance.
- 1612: King James I chartered the Virginia Company of London to raise revenue.
- The company was authorized to conduct lotteries throughout England in order to raise money to support the Jamestown settlement.
- Between 1746 and the Civil War, lotteries were authorized for such projects as the establishment or improvement of Harvard, Yale, Kings College (Columbia University), Princeton, Rutgers, Dartmouth, Rhode Island College (Brown University).
- Privately conducted lotteries prompted concerns about unfair competition and fraud.
- In response, most colonies adopted regulations that outlawed lotteries for personal profit.
- Advertisements spoke about lotteries as