IAmA Employee of a state lottery with intimate knowledge of the industry. AMA.

The biggest weakness in a safe or a lock is that it's meant to be opened. If you know how the insides work, it makes it easier to open. Is this true of the lottery? Is there such a thing as "inside trading" among lottery corporate? You guys know more about the system then anybody else. How easy would it be for you to ensure a winning ticket for a friend, etc. If a lotto insider wanted to, would he/she be able to successfully generate a winning ticket after the numbers are drawn?

I love this question. Thank you for asking it. The lottery industry operates like Las Vegas. In other words, the whole thing is governed by an extreme separation of duties and access controls. Every lottery has a security division that exists for the sole purpose of catching crooks - both internal and external. It's virtually impossible to "rig" a drawing or generate a winning wager post-draw without collusion on the part of at least five or six people. And even then, it would take a miracle to get past audits, system checks, etc.

I'm not saying that people haven't tried, regardless. I'm not even going to say that it hasn't happened. I will say it's a one-way ticket to federal prison, though.

do you know of any situation like this that has happened?

I know of one situation in another state where an employee got caught trying to rig orders on instant tickets by working with a friend who was a night shift clerk at a convenience store.

They got caught and did two years apiece.

Extreme hypothetical here.

Let's say someone has figured out a way to transmit information into the past from the future. They bide their time, wait for a big win to come along, perhaps in Canada where no tax is taken off the winnings.

Then they get greedy and try to take two wins, maybe three or four. Maybe hand guaranteed winning numbers to family. I assume the extreme improbability of such an event would get someone's attention.

I guess what I'm working up to, is there any sort of protocol in place to attempt to deal with information gained from the future, or for dealing with a time traveler? Would it even be illegal?

No. There is no protocol for this - legal or otherwise. If you figure it out, you're in the clear.

I once hit it big with an instant scratch off. I won 100,000 dollars, but lost the ticket when I was hit by a car. You know the kind of guy who does nothing but bad things and then wonders why his life sucks? Well, that was me: every time something good happened to me, something bad was always waitin' around the corner. Karma. That's when I realized I had to change. So, I made a list of everything bad I've ever done, and one by one I'm gonna make up for all my mistakes. I'm just tryin' to be a better person. My name is Earl.

I feel like I just got Bel-Aired. You win the thread, sir.

Are you allowed to buy lottery tickets?

Is the lottery just a tax on poor/stupid people?

No. I don't know of a single state that allows lottery employees to buy tickets.

As far as being a tax on poor/stupid people, I hear that argument all the time. The truth is that people from all walks of life play lottery games. If anything, the most frequent players are older retired folks who don't have anything else to spend their money on - not poor people.

I would say there are better ways to spend money if you have nothing else to spend it on, charities and whatnot, but my state lottery paid for my college education. So I'm damn happy about it.

EDIT: I just realised this could be confusing, I didn't win it, I don't play. It's a scholarship with set requirements. If you make the GPA/ACT cutoff and you go to an school in state, you get money every semester as long as you don't fuck up.

I agree. There are better things to spend your money on.

But then again, you can't win if you don't play. If you want a chance to win, you've got to buy a ticket.

Any interesting stories of fraud you can tell us about?

Dozens.

You'd be shocked at how often retailers steal tickets from players by telling them that their ticket isn't a winner. A few states have even gone so far as to set up an undercover team that specializes in catching these people. What they do is present retailers who players have complained about with "marked" tickets and then have them arrested when the retailer comes in to claim the prize. It's a big program in California. They've caught a lot of people.

I've also seen several cases where a retailer is mass producing draw game wagers and re-selling them overseas on the Internet for huge mark-up - sometimes as much as 1000% of face value. That's a quick path to prison, too.

And then, of course, we get idiots who do everything they can to make losing tickets look like winners hoping to get an idiot convenience store clerk to "sight validate" the ticket instead of scanning it in the system to see if it's a win. We discourage the hell out of that behavior. Clerks should never pay out based on a ticket they THINK is a winner. I will never understand why they don't just scan the damn things.

It's funny that you wrote about this tonight. Not sure if you caught Dateline NBC but Chris Hansen did a special where he had an undercover crew go into retailers, present 3 tickets (2 losers and 1 winner say $7500) and see what the retailer would do. Some of them would tell them that they won a big prize, others would say "All losers" or "You won $5!" then they would turn around and try to claim the prize for themselves. Needless to say Chris Hansen would walk in and say "Why don't you have a seat right there..." It was a great special to watch, did you catch it?

That special is part of the reason I started this thread. It was actually the second time Hansen has done a piece on retailer scams. The first one sent a shockwave through the industry and caused several lotteries to create programs due to outcry from players following the revelation that people steal things.

Clerks should never pay out based on a ticket they THINK is a winner. I will never understand why they don't just scan the damn things.

As a former clerk who sold lottery tickets, I would guess that the reason why "sight" payments is an issue is because the lottery machines (like any other machine in your average convenience store) are down ALL THE DAMN TIME.

The official policy is, of course, to tell the customer with a winning ticket that you are sorry that you cannot cash the ticket at that point in time and to come back at some random point in the future when, hopefully, the machine is working. However, if you work in a store that heavily emphasizes customer service, the customer is a regular customer, you have a long line, and/or you simply don't feel like getting into an argument at that point in time, the pressure is certainly on to just give them their $3 based on your own analysis of the ticket.

Obviously, this isn't the best practice, and I never saw this happen with a winning ticket of over $5. However, the reality is that in an environment that employs (typically) people making minimum wage with a high school level education, mistakes and variations from store policy are going to happen. I've worked many different jobs at many different levels, and low-level retail in a busy store is easily the most high-pressure of the bunch.

TL;DR - Clerks pay out a ticket they THINK is a winner because they trust themselves and the lottery machine is always down.

I totally understand that. And you're right. The terminals go down far too often. But you're taking on an incredible liability (read: potential job loss or lawsuit) by sight validating.

I worked at a small grocer that sold lotto tickets and our machines made these stupid sounds whenever a winning ticket was processed. I asked my boss if we could turn it down, but he said their lotto ticket license could be revoked because it could aid ticket stealing. Is this common?

Yes. This is very common, in fact. That sound is loud and obnoxious for a reason. :)

Until recently I worked at a convenience store, where I sold tickets to compulsive gamblers. They seemed to think there was somehow a conspiracy where the winning numbers are fixed in advance. They still played for some reason, and sometimes I argued with them about randomness & statistics.

Here's my question: WTF? This "game" ruins peoples' lives, and many with mental illness seem particularly vulnerable. I don't see how it's even remotely beneficial.

Also, what software platform do you use?

There are definitely a lot of people out there with gambling problems. I won't argue that point with you. I will say that the vast majority of the population seems to have a handle on their play, though.

Can you be more specific about your question regarding software platform?

You mentioned that you work as a programmer. I'm curious about what sorts of software & hardware systems the lottery uses.

It varies wildly from jurisdiction to jurisdiction. In fact, I'd go so far as to say that we don't really have "industry standards" for internal operations.

For hardware, we use a LOT of Dell, Cisco, etc. Nothing out of the ordinary for a big IT operation. Software-wise, we're a Microsoft shop pretty much top to bottom. (For what we do, they're by far the best.)

generating random results is pretty much Microsoft's schtick.

Bra-fucking-vo. I haven't laughed out loud so hard in a LONG time.

Not sure which state you are from, but South Carolina lottery terminals are Linux based now.

Well, if we're talking about field equipment, then yes - the standard out there is Linux.

What distro? Custom I assume, but must be based on something

Custom build on top of Red Hat.

Has anyone ever won a high tier prize and not ever come to claim it? Do you get to see people claiming their money/ their reactions? How did you even get into this industry in the first place? Do you play the lottery yourself?

Yes. It happens all the goddamn time. You wouldn't believe how often, actually.

Yes, I get to see people claiming money on occasion. I've seen it all: poker face, tears, hysterics... and one guy who busted out in a full-on dance routine that would have shamed even Michael Jackson.

I fell into my job. Seriously. It was an accident. I was in the right place at the right time.

I used to buy instant tickets on occasion. I can't play as an employee. I will probably play occasionally again if I ever leave the industry.

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Nothing, really. I'm sure this has happened. But if you get caught benefiting from a win like that... bad news.

I've noticed a new fade in lottery payouts that are "win x amount every week for life" but in small print it will always say "a guaranteed payout of at least x amount" If i win one of those, will the state pay me until i die, or do they have some legal loophole to get out of it after they hit that minimum. The difference between a 20 year old winning and an 80 year old winning one of these is enormous if they actually pay out.

Always read the fine print. Some games are truly "for life". Others are not.

Really?! I don't understand how any game can afford to payout $10K (or more) per week, for life. I do read the fine print, but I always just assumed there must be something I wasn't seeing.

It all comes down to how many people are buying tickets trying to win that $10,000/week for life.

When a scratch ticket claims that there are "win for life winners" or there are "10 $2 million prizes" do they actually have those already printed? I always think that they will wait until the last second to print those then distribute them. I mean it would be bad for business if all grand prizes were won at the start. Also, do they continue to print tickets as they go along or all tickets for a game printed at once, distributed and that's that?

Alright, here's the basic rundown on a scratch (also referred to as instant) game at a typical lottery:

The lottery usually has a designated liaison or a team of some kind that works with the jurisdiction's instant ticket vendor to come up with the art, prize structure, etc. (Lotteries don't print the games themselves. This is done at a high security location owned and operated by an outside vendor. That's a world all on its own.) The game is printed all at once. It isn't done in phases and a game's prize structure doesn't change once it's set. In other words, it is possible for the top prizes from a game to be claimed within the first few weeks after a game ships.

Speaking of shipping, scratch games are almost always shipped from the vendor to some sort of distribution facility owned by the lottery for which the game was printed. Tickets are shipped out to lottery retailers from there.

Every instant ticket game has a set expiration date (usually printed right on the ticket) and some states have laws requiring that the lottery to post information about which prizes have already been claimed on their website and/or at their office(s). Most people never think to check this, though, and they just keep buying even after all "top tier" prizes have been claimed.

Most lotteries have a set monthly or quarterly schedule for new instant games. That's all relative to the size of the state and how popular instant tickets are there.

There are only a handful of companies in the world that print instant tickets both because it's incredibly expensive to do and because trust is paramount in the lottery industry. The two largest and most trusted printing operations are owned by Scientific Games and GTECH, which also happen to be two of the most popular draw game vendors.

What about distribution? Does someone know where the top tier winning tickets will end up? How do they spread them out so that all of the best ones don't end up at the same liquor store on the corner?

No. The vendor knows which packs contain the high tier winners. The lottery doesn't. And vice versa for where the packs are shipped. As long as that balance is preserved, everything is kosher.

am I being a complete boob when I play these?

Chances are, yes. But then again, you could pop a $1,000,000 winner one day when you least expect it. I just had a chat with a guy a few weeks ago who stopped to buy a newspaper at a gas station, decided to get an instant while he was at it, and ended up walking away with $500,000. Paid off his house, car, and credit cards.

Did you hear about that guy who cracked that scatch game in Canada.

Yep. Ontario. Bunch of total morons running that shop. People who have worked for the Ontario Lottery don't even list it on their resume if they can avoid it. I know two former employees of that lottery. Poor bastards had some of the most incompetent leadership in the history of the industry.

Care to explain more about why they're so incompetent?

They got blown to bits in an audit. They were told to fix their operation. They categorically failed to do so and as a result other lotteries across the country have had to deal with intense public relations fallout.

What is the best strategy to win the lottery? Or am I better off just not playing at all? Do you know what happens to most lottery winners? Do they go crazy and spend it irresponsibly or do most of them end up being smart?

It all comes down to odds. In my state, for example, we have several daily draw games that have relatively low set jackpot amounts but the chance of winning is exponentially higher than the rolling jackpot games.

As far as scratch (also known as instant) games go, stay away from $1 and $5 games. Everyone buys them, so the chance of winning a top tier prize is low, and the top tier prizes are normally not enough to warrant playing. You've got a good chance of winning big on $10 games if your state sells them. Nobody buys those. I don't even know why some states even bother with them, honestly.

what about the $2 and $3 ones?

Anything is better than the $1 games. Those are designed to be low-return impulse buys that you win one out of twenty times. You'll never win enough to make playing them worth it over the long term.

Friend of mine won $10,000 on a $1 scratch ticket. His finacee lost it all at the casino within a month. He kicked her ass to the curb.

I once talked to a guy who was claiming a $50,000 win. He wasn't excited because he was "just breaking even".

ಠ_ಠ

|You'll never win enough to make playing them worth it over the long term.

Isn't that true of every lottery system though? They all pay out less than they take in.

Yes. But you're dicking yourself playing $1 games. They're impulse bait, plain and simple.

What about the $5 instants with top prizes of around 2 million (California's Set for Life or something)?

All of the "set for life" games are pretty damn cool, if you ask me. Low odds but it really does set you up for life.

Are you familiar at all with the 666 scandal in the PA lottery back in the early 80's? How did something like that happen, and what would prevent it from happening again?

Never heard of it before. Way before my time. I'll have to do some research.

What are your thoughts on statisticians ?

http://www.dailymail.co.uk/news/article-2023514/Joan-R-Ginther-won-lottery-4-times-Stanford-University-statistics-PhD.html

There are always going to be a handful of highly intelligent folks who figure out a way to play the odds in their favor. It's the same principle as card counters in Las Vegas. For the most part, though, bad algorithms get weeded out and replaced eventually. On the whole, the industry never loses money.

As a Computer Engineering student, I never understood the idea of how an algorithm could be completely (100%) random. It does not make much sense. If someone is writing an algorithm it must not be random because it was written by a rational human being with the idea of producing something completely random. But that does not mean it is random to the person who wrote the algorithm. If someone knew the algorithm why would they not be able to predict the results?

Without delving too deep into industry secrets that could probably get me sued or killed*, I will say that you are absolutely correct in that an algorithm alone is never completely random.

And that's why there's more to it than just a software algorithm. There's also specialized hardware involved that would leave your jaw hanging were I to explain how it actually works. It has to do with time, white noise, and an absolutely incredible control environment.

(*) I'm only half-joking. Anyone who thinks that organized crime isn't still involved in the lottery industry on some level is a complete fool. This is another topic I could probably write a book on.

you had me at "jaw hanging". elaborate a little?

He had me on organized crime. Wut.

Back in the late 90's and early 2000's, there were allegations of ties between organized crime (i.e. the mafia) and a few of the big names in the lottery industry. GTECH, for example. You can find more via Google searches if you're so inclined. I'd prefer to dodge the subject, as it's based largely on speculation, anyway.

You could write a book on it, but it's largely speculation? Wut?

coughjustsayingspeculationtocovermyassit'sactuallytruecough

I've only seen the inside of a draw game machine once. But the process by which the numbers are drawn gave me a bit of a nerdgasm. Without going into too much detail (again, trying to avoid a lawsuit), the design of the machine is nothing short of brilliant. It's a sophisticated combination of toggling hardware, RNGs, and algorithms all working in an elaborate sequence to kick out a random data set. The science behind it is crazy.

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We just had a case here in GA where an illegal alien won a jackpot and gave the ticket to his boss to claim on his behalf. Of course, the boss screwed him and ran with the money. 2 days ago a jury awarded the illegal immigrant the $750,000 prize, attorney fees and punitive damages. Now when he gets deported, he'll be able to afford to come back legally!

link

People frequently give winning tickets to friends or family members in an attempt to avoid paying debts. I always get a kick out of it when the person they gave the ticket to ends up owing more than them - or when they just take the money and run. It happens more often than you'd think. A lottery ticket is a bearer instrument. It's very important if you win to sign the back of your ticket.

In our state, you have to provide proof of identification and we have to be able to run a debt check on you in order to pay a prize. Taxes, etc. must be paid as well.

In other words, I don't think an illegal alien would be able to claim.

A debt check? For what reason?

Most states require a debt check in case the person trying to claim the ticket owes a debt to the state. (Court fees, child support, etc.) If they owe, the debt is subtracted from the win and the winner receives the difference.

Twenty, or so years ago, a friend (who's good at math) said to me that if one were to get an organization together with the funds to bet all the possible numbers on a big drawing, a tidy profit was assured.

Then (years later) I heard that this was actually done. An organized group had tickets pre-filled-out and went to multiple stores and bought every possible number combo, on a big multi-state drawing, and their strategy worked. Then lotteries have altered their drawings since then.

Do I remember this correctly, or is it urban-myth?

It's possible, I suppose. I've never heard about this before but if it did happen, the game was flawed. The lottery industry operates on the same "house always wins" model as Las Vegas. A few people take home the big jackpots here and there but in general, lotteries are designed to generate revenue.

It depends on the game. You'd have to compute the cost of one ticket, times the number of possible combos. If that's less than the jackpot, then yes, such a strategy would make sense.

...and you'd have a draw game that's about to be replaced because it's defective.

Most lotteries have internal research and development teams whose job it is to make sure the lottery makes money on all of its games.

Why can't we buy lotto tickets online?

That's almost entirely a result of two things: politicians who stand on the anti-gambling soapbox to get votes from the religious right and tribes who spend millions lobbying against it because they know it will kill their casinos.

Have you found instances of people laundering money via the lottery? I know there's a fictional movie where this happens, but I also have to believe it's not something that occurs in real life.

(For those of you who are new to the concept, the general idea is that a lottery winner sells his/her ticket to someone who has an illegitimate source of income. That person then turns in the ticket, and suddenly has a legitimate source of income.)

I'm sure that something like this has happened before. I've never heard of a specific case, though.

• How is the payout of large jackpots usually structured?
• If the winner is given the option of taking a discounted, lump-sum payment versus an annuity or monthly payments, what discount factor does the lottery use to determine the lump-sum payment?
• Are income taxes automatically deducted or do you offer some sort of tax planning advice to the winner?
• Do you offer any sources for financial/legal planning to the winners to utilize after winning, such as CPAs, lawyers, or financial planners?
• Does the lottery "own" the money it pays out, or does the Lottery itself have debt and borrows money to finance the winning payouts?
• How does the Lottery store and maintain custody of its funds? I'd imagine they'd want to earn interest by holding in a low-risk account.

I'll respond in order.

• Most of the time, you have the option of either an annuity or a lump sum. Most people take the lump sum. Annuities seldom make sense - and there's always the chance that you could die in a freak accident. Your win isn't transferable to an heir in most states.

• I have no idea how they determine it but it varies based on the game.

• Taxes are pulled up front. You still have to report at the end of the year but - at least in my state - you're issued an income statement to use.

• We provide players with general advice on what to do next. We're not allowed to recommend specific people or firms, though. Most people head straight to a financial planner, surprisingly.

• This is a complicated question. For in-state games, the lottery "owns" the money. It's taken from sales. For multi-state games (Mega Millions and Powerball), payouts on the big jackpots are covered across all of the participating states. It's a complicated process that I'm not entirely familiar with, as I don't work in finance.

• In my state, the lottery is a state government agency. Another state agency, which is in charge of budgets for every agency, handles our deposits from sales. We cut our own payout checks from our accounts.

What is the easiet type/brand of lottery to win? If you were allowed to play which would you play and how often?

It's all about the odds. In my particular state, I'd be playing the $10 instant games. I'd also be playing two of our draw games, which have low relative jackpots but high payout rates.

what are your thoughts on the state having a monopoly on lotteries?

Not all states have monopolies on lotteries. It really depends on each state's own laws, whether they have a strong tribal presence, whether they have an independent gambling commission or other regulatory boards, etc.

To answer your question, I don't personally believe that any state should be able to hold a monopoly on gambling.

So what percentage of lottery winnings actually goes to the school system? And how is that money distributed to the schools? Do they just choose schools who need it most, or is it based on where the ticket was bought?

Beneficiaries vary from jurisdiction to jurisdiction. I work for an education lottery. The percentage that goes to them changes every year, it seems. And the school system here is a pile of crap, so they just burn it, anyway. It's sad.

As far as which schools get the money - that's not a decision we make. I have no idea how it's divvied up.

Last time it was hacked?

Whats your change control like

The lottery I work for has been around for decades and we've never had a significant "hack" of our gaming system. Our website has been defaced twice, however.

Change control internally is extreme, to say the least. Everything is logged, documented, signed off on, etc. We're subjected to rigorous external audits on everything we and our vendors do software-wise annually.

Are quick picks really randomly generated or are they picked using some least picked number algorithm? I always wonder if somebody is getting the same ticket taken from a pool of crappy numbers.

I can't speak to this for all states but I can tell you that in mine, the quick pick algorithm is pretty damn random. We have more winners from the QP module than we do from people who pick their own numbers.

Your job must have been really interesting! So, is it 100% random?

Interesting, yes. I'd also use the word "stressful" to describe it.

I could write a book on how our draw game systems work. The systems themselves are built and maintained by a tiny company that more or less has a monopoly on the market. They're incredibly complicated pieces of hardware running some of the most complex yet elegant software I've ever seen. They've spent years and millions of dollars working with independent labs and statisticians to develop their products.

In other words, yes, it's as random as mathematically possible.

Do you know of many really big jackpot winners, like several million $ and up, that blow it all? I keep a link to an article about that from a few years ago: http://www.businesspundit.com/10-people-who-won-the-lottery-then-lost-it-all/

How many people claim big jackpots anonymously, or via a lawyer with something like a blind trust? I see/hear too many stories like in my link above, about "friends" and "family" and "charities", etc, coming out of the woodwork, tracking down big time winners, trying to get a piece of the pie. I think it's best to not ever let anybody know you won.

I've heard the horror stories but never encountered a winner who "blew it all".

I will say, however, that winning the lottery doesn't seem to make people any happier over the long term. If they had problems before, they continue to have problems - they're just not financial in nature anymore. If they were happy before, they continue to be just as happy.

What would you do with the money if you won the big sombrero? I mean you probably would't play in the first place but hey what if.

I'd get the hell out of the United States, for starters. Beyond that? I'd get a decent little house on a nice chunk of land, one really nice car, one really nice bike, and I'd live out the rest of my life comfortably and sensibly.

Whats up with the second chance draw on scratchers? Does anybody actually win those prizes and how do they select the winners?

Yes, people DO win. The point of those drawings is to keep players interested in playing even if they don't win anything from the game itself. Those drawings are just as controlled as any other - at least in my state.

What sorts of checks and audits are there to ensure that no insiders are rigging the results? I mean, people must try - don't they?

Here's some news on a family of Korean convenience store owner/operators up in Canada, the Chung family, who were caught & convicted of defrauding customers of winning tickets:

http://www.cbc.ca/news/canada/toronto/story/2010/09/29/lottery-theft029.html

The provincial police investigation and arrests follow a scathing report from Ontario’s ombudsman, which was triggered by the CBC's The Fifth Estate story.

Since 2007, hundreds of wins have come under question, and the police have taken on a key role in the investigations.

A forensic audit released in February 2009 revealed that lottery retailers, employees and their families have taken home $198 million in prizes over the past 13 years.

Starting on Jan. 1, 2008, a unit of 14 police officers has been working with the OLG regulator, the Alcohol and Gaming Commission of Ontario, to investigate insider and suspicious wins.

In 2008, the police investigated 477 insider and suspicious wins, resulting in charges against 14 people. Last year, 355 such wins were investigated and four people charged.

I could talk about this particular topic for days, as it's something that I've worked very closely with. Retailer fraud is a broad, extremely interesting topic. The long and short of it is that if you try to scam a lottery, you will get caught. It's not a matter of if. It's a matter of when.

The lottery I work for undergoes something like a dozen audits a year. Some are carried out by internal auditors. A few are carried out by external auditors employed by our state government. (Those are mostly financial in nature.) Still others are carried out by independent firms employed by the state and the lottery to ensure that everyone is doing what they're supposed to do.

Do you play the lottery?

I can't play my own state's lottery games. However, I do get tickets from other states if I visit somewhere - simply because I'm not allowed to play at home.