Another Massive Mega Millions Prize Is Up for Grabs. Are Big Jackpots Getting More Common?

Headline-grabbing sums seem to be the new normal.

If the recent trend of huge jackpots has caught your eye, you're not alone. In fact, catching the eye of the public may be exactly why jackpots are getting larger. The last seven years have seen the 10 largest U.S. lotteries ever won, half of which have been won since 2021. But before you try your luck, it may be worth considering why these jackpots are stacked so high -- and what it could mean for you.

Changing the game

The Multi-State Lottery Association is one of the biggest names in intra-state gambling, and exercises nearly complete control over the games it conducts. And when those games, including the Powerball and Mega Millions lotteries, rack up billions of dollars, even small changes can have a huge impact.

One reason for larger jackpots is that they are harder to win. Prior to 2017, your odds of winning the Mega Millions lottery were roughly one in 258.9 million. In October of that year, the MUSL made long odds even longer, dropping your chances of winning to about one in 302.6 million. And when it's harder to win, the chances of the jackpot going unclaimed and continuing to grow are better.

What's a dollar worth? If you're the MUSL, the answer could be millions. Among the 2017 rule changes, ticket prices for the Mega Millions jackpot were raised from $1 to $2. A change which may not affect a consumer much could greatly increase the grand prize.

A wider footprint

The MUSL traces its roots back to an agreement between five small-population states and the District of Columbia in 1987. The Association has grown substantially since then, and now sells tickets in 45 states.

Much of that growth has occurred since 2009, with 14 new states being added since then. This explosive growth can be attributed to a deal brokered in October of that year allowing cross-selling of Mega Millions and Powerball tickets.

A wider player base means more tickets sold and more tickets sold means a bigger jackpot. So will this growing player base continue on its upward trajectory? Probably not. As of this writing, only five states don't currently sell Mega Millions or Powerball tickets, leaving the MUSL with limited room to expand.

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Rising rates

Another contributor to the eye-popping jackpots in the headlines has nothing to do with how the game is played or by whom. Rising interest rates can artificially enlarge the grand prize, or at least the oft-quoted annuity option.

After the excitement of winning the lottery wears off, the winner faces a choice: to take the prize as a lump sum or to be paid out over an extended period of time; 29 years in the case of the Mega Millions and Powerball jackpots. But here's the catch: those two options pay different amounts. That's the concept of the time value of money.

The annuity option factors in an annual rate of interest, and when interest rates across the economy rise, so does interest paid to an annuity-choosing lottery winner. The annuity option counts these interest payments accruing over decades in its total value. While the most recent, and as of yet unidentified, Mega Millions winner won a headline-snatching $1.348 billion, they would only receive $723.5 million if they took the lump sum.

Jackpots of staggering sizes appear to be the norm now, but the math behind them might make you think twice. While some of the inflation is artificial thanks to rising interest rates, the game has gotten harder to win. Additionally, more players means a higher chance of having to split the prize should you win. However, it can be hard not to take your chances with a billion dollars on the line.