The Government’s Shameful Stake in the Gambling Glut

T he wave of sports betting scandals has been building for years, but last month’s arrests of NBA player and coach Chauncey Billups have catalyzed a hard conversation about them. After all, every sport seems to be suffering from high-profile betting scandals. In baseball, there were Shohei Ohtani’s translator, Luis Ortiz, and Emmanuel Clase from the Cleveland Guardians. In basketball, Terry Rozier, as well as the Raptors’ Jontay Porter. In football, Quintez Cephus, C. J. Moore, and Demetrius Taylor of the Detroit Lions. And that’s just to name a few.

But just as the recent news has shone a light on the corrupting effect that gambling has on sports, it has perhaps created an opportunity to talk about the other gambling scandal: state lotteries.

According to USA Today, “Americans spent $103 billion on lottery tickets in 2023.” In most states, lottery revenue provides 1–3 percent of the funding for infrastructure and education. According to Fortune, “America’s poorest households spend 33 times more of their income on lottery tickets than the rich.” More specifically:

The average adult living in the poorest 1 percent of zip codes spends almost 5 percent (or $600 annually) of their income on lottery tickets, per the analysis. . . . Those living in the wealthiest 1 percent of zip codes spend only $150 on tickets, amounting to 0.15 percent of their paycheck.

It follows, then, that state lottery revenues aren’t driven by middle-class or upper-class households buying a handful of tickets a year but by serial ticket-buying by retirees, welfare recipients, and the working poor.

This is a crucial moment. Despite widespread support for legalized sports betting among the American public, for the first time in decades, there’s a serious conversation being had about the harms of gambling. We’re recognizing the fact that the profits of DraftKings and FanDuel are driven by compulsive gamblers, not by casual sports fans who make a bet or two on the weekends. Charles Fain Lehman and others have highlighted the fact that casual gamblers often become problem gamblers, and that gambling addictions are on the rise, driven by sportsbook apps.

We should extend this logic to state lotteries. Lottery tickets are disproportionately bought by lower-income, less-educated demographics. They are often bought by retirees using their Social Security checks. There is the old joke that “the lottery is a tax on people who are bad at math,” but the truth is that the lottery is a tax on compulsive gamblers, who spend an average of $1,300 a year on lottery tickets (according to the National Council on Problem Gambling). And just as alcoholics buy a disproportionate amount of the beer sold in the U.S., the 2–3 percent of U.S. adults who are gambling addicts buy perhaps a majority of lottery tickets. As a report from an addiction counseling firm put it:

According to research from the North American Association of State and Provincial Lotteries, a significant portion of lottery revenue comes from a relatively small number of players. For instance, a study on Minnesota’s lottery found that 71 percent of its income is generated by just 20 percent of its players, while a similar study in Pennsylvania showed that 79 percent of lottery income comes from 29 percent of its players.

If you eliminated serial ticket buyers, and states only took money from people who bought a lottery ticket once a year on their birthday, state lotteries probably wouldn’t even cover their costs.

Conservatives should be clear about something. Gambling is a vice. It is not a social good. It is not an individual good. One of the roles of the conservative in society is to frown upon vices, to enforce social stigma against those activities that harm both the individual and society. Whether or not you believe that adults should be free to make their own choices about their money, including choosing to waste it on sports betting or lotteries, every conservative should agree that states shouldn’t be profiting from a vice. Even libertarians should agree with that, even if they don’t believe there’s anything wrong with gambling.

As David Bahnsen has noted, responsible adults who can exercise self-control are perfectly capable of dabbling in a vice or two without becoming addicts. A successful businessman who plays blackjack once a year, or a college professor who smokes a pipe once a month, doesn’t have to worry about a vice becoming a compulsion. Many American adults drink alcohol responsibly, rarely or never drinking to the point of inebriation, and never driving while intoxicated.

But some adults aren’t capable of exercising such self-control, and it is for this reason that conservatives frown upon vices. We may not always believe in the efficacy of restricting the freedom of all adults based on the inability of some adults to exercise self-discipline. But we certainly shouldn’t support state governments balancing their budgets on the backs of that unfortunate minority of adults who struggle to regulate their vices.

One argument in favor of state lotteries is that, since the government supposedly has its citizens’ best interest at heart, unlike casinos or corporations or crime rings (which often ran numbers rackets in the past), a state-run lottery is less likely to be abused. But in 2008, the State of Virginia sold around $84 million worth of tickets for a lottery that had already been won, cheating Virginians out of their money with the false promise of potential reward. And this isn’t the only such scandal.

If state governments can’t be trusted to run a clean racket (whether because of malfeasance or bureaucratic incompetence), there’s no good argument that they should be in the gambling business at all. True, the lottery makes a lot of money for some states. But this should be an argument against state lotteries. It should be a scandal that they’re making any money at all. But states have become addicted to the revenue they collect from lottery addicts. Over time, this has a corrosive effect on sound government.

Why? Because state governments need to collect their revenue honestly. Lotteries are regressive — they disproportionately take from the people who can least afford to lose. More fundamentally, they involve the government in promoting, encouraging, and spreading a social ill. They put the government in the vice business. State governments benefit more when there are more lottery addicts; these governments depend on those addicts for part of their general funds and need lottery addiction to keep growing for their revenue to keep pace with rising costs.

A similar argument could be extended to state governments (such as Virginia’s) that sell alcohol. Even if most of the people who buy liquor or lotto tickets never develop a dependency, the more people make such purchases, the more some of them will become addicts. In a free society, citizens can decide for themselves whether or not to drink alcohol or buy lottery tickets. But our governments should not be in the business of promoting and benefiting from such habits, especially when so much of the revenue raised by them comes from addicts. It’s time to end these regressive revenue streams. It’s time for states to get out of the lottery business and raise their revenue honestly.