Legislative Oversight of the State Lottery

state lottery

More than three-fourths of states have a state lottery, offering citizens the chance to win big jackpots while providing the government with funds for education and other projects. But critics say the lottery does more harm than good, promoting addictive gambling behavior and hurting poor people.

State legislators create and oversee the lottery with laws governing the duration of the sale, how the winners are chosen and other aspects of the games. They also specify the amount of money that can be awarded, whether there is a tax on winnings, and what documentation a winner must present to claim his or her prize.

The federal government doesn’t regulate state lotteries, which are exempt from the same regulations that prohibit misleading and deceptive advertising. Instead, oversight falls to state legislatures that rely on lottery revenue to help balance their budgets.

While a small percentage of the proceeds are earmarked for specific purposes like public education, the rest is deposited in a general fund that can be spent for whatever the legislature chooses. Some critics argue that earmarking lottery revenue actually reduces appropriations for the programs targeted because lawmakers can redirect those funds to other uses without having to pass an extra tax to voters.

New York state Senator Joe Addabbo has seen a number of his constituents become targets for scammers and financial advisors after winning the lottery. He says it led him to reintroduce a law that will let lottery winners keep their identities private. Currently, winners can only stay anonymous by forming an LLC, and most don’t know about the loophole or have the resources to do so.