The lottery is famous for offering the biggest jackpots in gambling. Mega Millions and Powerball have both delivered payouts worth over $1.5 billion. Meanwhile, plenty of other lotteries throughout the world also offer impressive prizes.
But the lottery has a badly kept secret that should give gamblers pause: it features terrible return to player!
The RTP for many lotteries throughout the world ranges between 50% and 60%. No other form of gambling gets a pass for such bad RTP.
Why then do people overlook how badly the lottery pays? Five reasons exist behind this phenomenon, which you can read about below.
1 – Lotteries Offer the Biggest Jackpots
In the back of their minds, everybody knows that playing the lottery isn’t a sound investment strategy. Many players receive little to nothing back for the money they spend.
However, most of the same gamblers are unnerved when their tickets turn up empty. After all, their eyes are on the biggest prizes.
Certain lotteries offer payouts that are unheard of anywhere else in the gambling industry. Prizes worth hundreds of millions of dollars are available through Powerball and Mega Millions.
Meanwhile, other national and even some state lotteries feature top prizes worth tens of millions of dollars. Many players have a win-all-or-nothing attitude when it comes to buying tickets.
They’ll gladly take common prizes worth $10 or less. However, they mostly just dream of winning a life-changing jackpot someday.
Of course, lottery jackpots must grow before they’re worth unbelievable amounts. Every prize needs to start somewhere—even the Mega Millions and Powerball jackpot.
Speaking of which, their top payouts are both seeded at $20 million. As mentioned before, though, they’ve each paid out record prizes worth just over $1.5 billion in their histories.
Of course, the odds of winning the lottery astronomical. But gamblers don’t let the long odds stop them from playing.
2 – Most People Only Buy a Few Lottery Tickets
The average person doesn’t go online or into a convenience store and purchase hundreds of tickets. Instead, they only buy a few in hopes of getting extremely lucky.
$2 is the average price for a big drawing. Assuming somebody buys 3-5 tickets per week, they’re only spending $6 to $10 over the span of several days.
Long story short, lottery gamblers don’t normally spend lots of money on their hobby. Therefore, they don’t fixate on payout percentages.
Many other forms of gambling, meanwhile, encourage people to spend much more in one sitting. Everything from slot machines to sports betting tempts one to bet hundreds of dollars.
Here are a couple of examples to show how much slots players and sports bettors spend:
- A gambler starts playing an online slot through their smartphone.
- They bets $0.25 on average per spin.
- They log 600 spins in one hour.
- 600 x 0.25 = $150 wagered per hour
- A sports bettor places a $25 moneyline bet.
- They also make a $25 prop wager.
- While watching the game, they place two live bets worth $25 apiece.
- The sports gambler has risked $100 in all.
As I’ll get into later, these types of gambles pay back much more on a per-dollar basis than the lottery. But lotteries don’t usually inspire people to risk as much money at once.
3 – Many Don’t Know About the Awful RTP
Some people would stop buying so many lottery tickets if they knew how bad the payout percentages were. After all, nobody wants to take gambles when they lose 50% of their money on average.
The problem, though, is that the average lottery player doesn’t know about the atrocious payback. Again, they’re fixated on jackpots and little else.
Here’s a look at the worst RTP on different state lotteries:
- South Dakota = 20.32% RTP
- Oregon = 25.05%
- Delaware = 27.20%
- Rhode Island = 29.81%
- Oklahoma = 50.37%
As you can see, the long-term prospects of winning aren’t great. However, many players remain in the dark regarding the payout percentages.
They might think more about other types of gambling if they knew the reality. Speaking of which, almost every other game outside of the scam known as three-card monte gives people a better chance of winning money.
Here are examples of games that feature much better payback than the lottery:
- Baccarat offers 98.94% RTP as long as you bet on the banker every time.
- Blackjack can offer up to 99.65% RTP if you find a game with good rules and use proper strategy.
- Craps features 98.64% RTP on the don’t pass line wager (even better with odds bets).
- European roulette offers 97.30% payback.
- French roulette features 98.65% RTP on even-money bets.
- The average sports better wins back around 95% of the money they wager.
Unless you’re an advantage gambler, every bet features negative expectation. The reason why is because the house always takes its cut.
But the degree of negative expectation all depends upon the specific gamble. The games covered above give you a decent chance to win in the long run. You just need a little luck to earn profits.
The lottery, on the other hand, offers much lower expected value. Therefore, you need plenty of good fortune to win money.
4 – The Lottery Provides More For Good Causes
Lotteries may be stingy with payout percentages. However, they do give lots of money to worthwhile causes.
In fact, many lotteries are set up with the sole intention of funding certain state or national government programs. These programs typically pay for school and/or senior center resources.
People aren’t in favor of big tax hikes—even if they go to important matters. However, the same crowd may be willing to pay for such causes if doing so gives them a shot at getting rich.
Of course, gambling revenue of all sorts flows towards different state or national programs. Politicians don’t like approving new types of gambling if the government isn’t getting a cut.
However, casinos, poker rooms, and sportsbooks don’t give as much of the profits towards social programs. Instead, they may pay anywhere from an 8% to 25% tax rate on their revenue.
This type of tax money still does a lot of good. However, it’s not quite the same as a lottery operator giving away 30% to 40% of its overall revenue.
5 – Lotteries Aren’t Typically Viewed as Gambling
If you look at the process of purchasing a lottery ticket, you can obviously see that it amounts to gambling:
- You walk into a convenience store or go online.
- You spend money to buy one or more tickets.
- The operator draws random numbers, or prints them on scratch cards.
- Your results depend upon if your numbers match the random ones on the card.
Simply put, you’re risking money to win money. Nevertheless, many people don’t really associate the lottery with gambling.
Instead, they simply see it as something that many people do for fun and thrills. As a result, average player isn’t overly concerned about payback.
Meanwhile, casino games, poker, and sports betting are definitely viewed as gambling. People want to know their chances of winning, or at least the house’s cut, with these bets.
Great emphasis is placed on the RTP of casino games. Gamblers especially want to know how much they can win back with slot machines.
Poker players want to know how much rake the operators take from each pot. Likewise, sports bettors look for bookmakers that have lower margins on bets.
The lottery definitely doesn’t pay well in the long run when compared to virtually any other type of gambling. Some lotteries even pay back less than 30% of what they take in through ticket sales.
Compare this dismal payback to blackjack (99% RTP) or French roulette (98.65%), for example. In short, you’re getting a raw deal when playing the lottery.
However, various reasons exist for why lotteries get away with bad payout percentages. They offer huge jackpots, give money to social causes, and don’t encourage players to spend lots of funds.
None of these reasons erase the awful payback associated with the lottery. But they at least show why people are still willing to regularly buy tickets.