As states continue to search for ways to fill budget holes, the latest gimmick is to privatize the lottery.
Illinois became the first state to privatize the lottery. New Jersey, Pennsylvania, Ohio, Washington and other states are all considering proposals to privatize the lottery. The push for short-term revenue gains comes with obvious risks that include opening states up to corruption and creating more problem gamblers.
State lotteries are giant cash machines. Private operators are salivating at the prospect of gaining control to those cash cows. If history is any guide, the backroom jockeying by the private companies must be watched closely. The winning bidders will likely be connected friends and big campaign givers to the governor or other powerful pols. (Those odds are much better than the odds of hitting the Power Ball.)
But even more problematic is the likely result of the sharp rise in problem gamblers that will come with private operators. Here’s why: a private operators will have an incentive to sell as many tickets as possible because that will probably be part of their compensation. As such, the private operator will be more efficient and aggressive when it comes to selling tickets. There will likely be an increase in places where tickets are sold. There will likely be an increase in lottery games to be played. And there will likely be more expensive lottery tickets sold. For example, Texas offers a $50 lottery ticket.
The result will be more people spending more money on lottery tickets. More people getting addicted to lottery tickets. And more people spending a larger percentage of their income on lottery tickets. Studies show that the most vulnerable residents spend a higher percentage of their income playing the lottery. Expanding the lottery through private operators may provide a short-term increase in revenue but will likely lead to more problems down the road.
