The History of the Lottery


During the early days of the United States, lotteries were a popular way to raise money for various public projects. The money raised was used to finance town fortifications, bridges, roads, colleges, libraries and more. Lotteries were often organized so that a portion of the proceeds would be donated to a variety of good causes.

The word lottery comes from the Dutch word “lot,” meaning “fate.” Lotteries have been around for centuries, but the first known European lotteries were held during the Roman Empire. The Chinese Book of Songs mentions a game of chance as “drawing of wood” or “drawing of lots.” In some cases, lotteries were tolerated or encouraged. In other cases, they were outlawed.

The first state-sponsored lotteries in Europe were held in the cities of Flanders in the first half of the 15th century. In the 17th century, lotteries were also used to raise funds for public projects. Lotteries were used to raise money for colleges, bridges, libraries, and roads in the Netherlands and the United States. Lotteries were also used in the colonies during the French and Indian Wars. In 1758, the Commonwealth of Massachusetts raised money for its “Expedition against Canada” with a lottery.

In the United States, lotteries are generally run by state or local governments. The winners are given an annuity payment or a one-time payment. The winnings are not usually paid in a lump sum, so they are subject to state and local taxes.

Most lotteries take 24 percent of the proceeds to pay federal taxes. The federal tax bracket is 37 percent, so winnings in millions of dollars would be subject to that tax bracket. However, withholdings vary by jurisdiction and investment. When calculating the value of a lottery ticket, expected utility maximization models can be used to estimate the value of the prize. In many cases, the monetary loss can be outweighed by the combined expected utility of monetary and non-monetary gain.

The first English state lottery was organized in 1694. Lotteries were also used by the Virginia Company of London to support the settlement of America at Jamestown. King James I authorized lotteries in the United Kingdom in 1612. In 1724, the English government announced the final lottery, which was called the Loterie Royale. Tickets for this lottery were incredibly expensive and were a big fiasco. Contemporary commentators ridiculed the lottery, stating that it was a waste of money.

A number of states have organized state lotteries to raise money for public projects. In addition, some governments organize national lotteries. These lotteries have been criticized as addictive and unproductive.

The oldest lottery still in operation is the Staatsloterij, which was established in 1726. In 1755, the Academy Lottery financed the University of Pennsylvania. A similar lottery was used to finance Princeton and Columbia Universities.

Financial lotteries are also popular. The New York Lottery buys special U.S. Treasury bonds. Lottery slips from the Chinese Han Dynasty are believed to have helped finance major government projects.