Fool.com: End Up With Lottery Millions [Fribble] May 23, 2000

Fribble End Up With Lottery Millions

By Jim Koury (JimKoury@aol.com)
May 23, 2000

If we compare a typical state lottery with a casino game, it comes closest to "keno."

In a typical state lottery, the goal is to raise cash for the state general revenue fund. The game usually consists of picking six numbers out of 54 choices. The prize pool is 50% of the money collected from the players. The biggest prize goes to the player who correctly picks all six numbers. Smaller prizes go to players who pick five out of six numbers, four out of six numbers, and sometimes three out of six. The remaining money goes into the state general fund (about 35 cents on the dollar) after the expenses of running the lottery (about 15 cents on the dollar) are deducted.

In the game of keno, there are 80 possible numbers, and the house selects 20 of those numbers at random during each game. The player may select as few as one number or as many as 20 numbers from the 80 possible choices. The amount that may be won will be greater if the player selects more numbers, and if more of them are selected by the house. For example, picking eight numbers that are all selected by the house pays out more than picking one number that is selected by the house. The average amount of money kept by the house (over the long term) out of all the keno games played is approximately 15 cents on the dollar. More than 85% is paid out to the winners.

We should conclude that the game of keno is much better for players than the typical state lottery. If a person bought one million state lottery tickets, the winnings would be approximately $500,000. If the same person played one million games of keno (spending the same million dollars on a lot of one-dollar games of keno), the player would end up with approximately $850,000. In both games, the player should expect to lose money over the long run.

So, how does a player become a multimillionaire by playing the state lottery? By starting with a billion dollars!