A lottery is a game in which participants choose numbers or symbols to win prizes, usually money or goods. State governments usually oversee and regulate lotteries to ensure honesty, fairness and the prevention of fraud. State governments can also use the profits of a lottery to promote social programs. Unlike other forms of gambling, which often involve betting on future events, winning the lottery involves choosing a number or symbol that corresponds to a specific prize. State lotteries may have different prize categories and rules.

In the United States, all state-run lotteries are government monopolies that prohibit private companies from competing with them. The profits of the national lotteries are largely allocated to public education and other state programs. As of 2004, forty-one states and the District of Columbia operated a lottery.

Proponents of lotteries generally argue that they offer state governments a way to enhance their revenues without raising taxes. They also contend that lotteries are financially beneficial to small businesses that sell tickets and larger companies that provide advertising, computer services and merchandising. In addition, they say that lotteries promote family values and encourage people to spend money responsibly.

The history of lottery dates back centuries, with the first recorded lottery games appearing as keno slips in China during the Han dynasty (205–187 BC). In the early American colonies, lotteries were used to finance paving streets, constructing wharves and building churches. In the 1760s, George Washington sponsored a lottery to fund construction of the Mountain Road across Virginia, and Benjamin Franklin supported a lottery to pay for cannons during the Revolutionary War.

By the 1980s, fourteen states had started lotteries (Connecticut, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, North Carolina, Ohio, Pennsylvania, Rhode Island and Vermont). Twelve more states began state-run lotteries during the 1990s, including Colorado, Florida, Iowa, Kansas, Montana, Oregon, South Dakota, Texas, Virginia and Wisconsin. In addition, several foreign countries have established their own state-run lotteries.

Retailers receive a commission on each ticket sold, but most state lotteries have incentive-based programs that reward retailers who meet certain sales criteria. These programs are based on the idea that increased retailer commission will result in more ticket purchases and, therefore, more profits for the lottery.

A 1996 survey found that 22% of those who play the lottery believe they will win a big jackpot in their lifetimes. The lottery industry feeds this belief by encouraging media coverage of large jackpots and by encouraging a widespread sense that the chance of winning is commonplace. This creates an inescapable lure for the average person who cannot resist spending a few dollars on a ticket. In fiscal 2006, state lotteries generated $17.1 billion in profits. Table 7.2 shows the allocation of those profits among different beneficiary groups.