Massachusetts Lottery Broken

wiredog sends in a story about how knowledge of lottery rules and statistics has allowed opportunistic players in Massachusetts to spend hundreds of thousands of dollars on tickets while being assured of a massive payoff. Quoting: "Because of a quirk in the rules, when the jackpot reaches roughly $2 million and no one wins, payoffs for smaller prizes swell dramatically, which statisticians say practically assures a profit to anyone who buys at least $100,000 worth of tickets. During these brief periods — 'rolldown weeks' in gambling parlance — a tiny group of savvy bettors, among them highly trained computer scientists from MIT and Northeastern University, virtually take over the game. ... Srivastava calculated that a gambler who bought 200,000 Cash WinFall tickets during four rolldown weeks in a year would win enough to cover the $1.6 million investment and earn a profit of $240,000 to $1.4 million — without ever winning the jackpot."

Re:Wait, what?

[Anonymous Coward]

Really?

My understanding is that this is the system working as intended. They don't want the jackpot to continually grow unchecked so when it reacher a certain size they pay out more on the smaller wins. My mother told me a similar story about older electronic slot machines. Basically the natural probability of winning was too low so they had to write a forced payout routine to make sure that the machines payed out the percentage of the time the casino's wanted (remember casinos want you to win often enough that you keep playing).

Re:That's what you get for exploiting your citizen

[i.r.id10t]

Thats what we did in Florida. All lottery funds are used for education.

Unfortunately they've cut *all* other funding sources for education... so sure since the late 80s the lottery has given over 10 billion to education... and the first few years were gravy... but now the lottery is the *only* funding source for education ...

not broken at all

[rubycodez]

"Broken" would mean the state was losing money. Your definition of "broken" needs fixed, you are jealous savvy people with enough money to invest can win at certain times

Re:Wait, what?

[jacks0n]

That comment is about variance, not expected value. EV/ticket is the same whether you buy one ticket or one million tickets.

Re:Winnings taxable?

[Thelasko]

A small detail from the fine article notes that all of these players buy the tickets on behalf of a corporation which they wholly own. Corporations pay taxes based on profits. Simply put, revenue minus expenses. They are likely writing off the cost of the tickets as expenses.

That would be $280,000 revenue - $200,000 expenses - $80,000x35%=$52,000 for three days of work.

Re:Bingo!

[Anonymous Coward]

#2 is just incorrect. State lotteries exist because both to make money for the government and to eliminate unregulated lotteries. The History Channel had a program on lotteries and, IIRC, the first ones in the US were in Harlem and they were so crooked that there wasn't even a chance those running it (organized crime) would lose. They eventually developed a system where the winning lottery numbers were determined by the winning horses in a specific race, but even then people were able to relay that information to accomplices who placed bets. The whole thing was so profitable that there was a ton of violence between competing lotteries.

So the states created their own for 2 main reasons...to make revenue for the state and to head off much of the violent crime that had developed between those competing to fleece players. That the game was regulated and there was an actual chance to win was what made the state's version more popular than the unofficial options.