Lottery is a form of gambling in which prizes are drawn by chance. In the United States, state governments sponsor a variety of lotteries. Prizes range from scratch-off tickets to multimillion-dollar jackpots. The games are played by many people and contribute billions of dollars annually to the economy. Despite the fact that someone is bound to win, lottery play should be considered more of an entertainment than a financial investment.

Historically, state-sponsored lotteries have operated similarly: the government establishes a monopoly; establishes a state agency or public corporation to run the lottery; begins operations with a modest number of relatively simple games; and then, under pressure for additional revenues, progressively expands the number of available games. A variety of issues arises with this process, from the potential for compulsive gamblers to the alleged regressive impact on lower-income communities.

The word “lottery” is derived from the Dutch noun lot, which means fate or fortune, and it is believed that the first recorded public lotteries to distribute cash prizes were held in the Low Countries in the 15th century. These were intended to raise funds for town fortifications, or to help the poor. In colonial era America, lotteries were used to fund a wide range of public projects. Benjamin Franklin held a lottery to finance cannons for the defense of Philadelphia in the American Revolution, and George Washington sponsored a lottery to build roads across the Blue Ridge Mountains.

In modern times, lotteries typically offer a lump sum cash prize or annuity payments. Annuity payouts are typically managed by an insurance company that invests the lump sum for a long-term period, and pays yearly payout amounts to the winner.