Lottery is a form of gambling in which tickets are sold and winners are determined by chance. In the US, state governments enact laws and oversee lotteries. Each lottery has a separate division to manage the sale of tickets and the distribution of prizes. These divisions select and license retailers, train their employees to use lottery terminals, provide technical support to retailers, promote the games, pay high-tier prizes to players, and ensure that all aspects of the game comply with state law. Each state also has a lottery commission that oversees all lottery activities.
Lotteries have a long history in many cultures. In China, keno was first recorded in the Han dynasty from 205 to 187 BC. During the American Revolutionary War, the Continental Congress held lotteries to raise money for the Army. Alexander Hamilton argued that “everybody is willing to hazard a trifling sum for the hope of considerable gain, and would rather take a small risk of losing much than a great chance of winning little.”
People buy lottery tickets because they enjoy the entertainment value and fantasy of becoming wealthy. Despite this, the purchase of a ticket cannot be justified by decision models based on expected utility maximization. This is because the cost of a ticket exceeds the expected gains, as shown by lottery mathematics. However, if non-monetary values such as excitement and entertainment are included in the utility function, a ticket purchase may be rational.
Winnings from a lottery are typically paid out in an annuity or one-time payment. In the United States, winnings are subject to income tax and therefore annuity payments are likely to yield a smaller final amount than the advertised jackpot prize. For this reason, many lottery winners choose to receive the prize as a lump sum.