Powerball Jackpot at $1.5 Billion, ‘But Not Many Jacks in the Pot

Published Wednesday, January 13, 2016 at 11:38 am

Rep. Stam on N.C. Lottery

The largest-value “jackpot” in the history of the NC Lottery is up for grabs Wednesday night at $1.5 billion. Unfortunately, this also means that gamblers are prey to deceptive advertising techniques that the NC “Education” Lottery has employed since its inception. The problem is that there are not that many “jacks” in the “pot.”

The NC “Education” Lottery advertises the “jackpot” at $1.5 billion, with an estimated cash value at $930 million if taken as a lump sum. But only the lump sum figure is the true value against which probabilities should be computed. The advertised value of winnings greatly exaggerates the prize. It could just as well be advertised as a “Trillion Dollar Jackpot” with the option of taking the money over 1000 years for the winner’s heirs. That would really get sales moving! But the prize would still only be worth the lump sum value.

The NC “Education” Lottery uses deceptive advertising by deliberately causing gamblers to believe they have amuch greater chance of winning a substantial sum of money than they actually do. The NC “Education” Lottery advertises the odds of winning, but does not transparently match the odds to the particular prize (see chart on page 2). The Lottery will list the value of the jackpot or highest few prizes, but advertise the odds of winningany prize, including the lowest-value prize. This time, the lottery describes the odds of winning any prize from one ticket at about 1 in 25.[1] But the website does not tell what that prize would be. Most likely it would be $4. Most gamblers are aware that the odds of winning the ultimate jackpot are much lower (about 1 in 292 million), but most gamblers are not aware that their odds to win the $100 prize is only about 1 in 14,494![2]

Lottery gamblers disproportionately have lower incomes and less education. They are enticed to spend money for a reward they are much less likely to receive than they even imagine. If this were a private swindle it would be banned by the Federal Trade Commission.[3] But since Lotteries are regulated by the States, they avoid those rules – and families suffer for it. It is time North Carolina protected its citizens from deceptive advertising by requiring common-sense advertising.

For further information on this issue, please call Representative Paul Stam at 919.362.8873.

[1] See http://www.nc-educationlottery.org/faq_powerball.aspx#43.

Q: What are the odds of winning?

A: The overall odds of winning are 1:24.87. The odds of winning the jackpot are 1 in 292,201,338.

The FAQ does not tell what prize will be won at 1:24:87, instead it is very specific and precise calculated to the nearest 1/100th. This precision is meaningless.

[1] See http://www.durangobill.com/PowerballOdds.html and see page 2.

[1] The Federal Trade Commission protects against deceptive trade practices (15 U.S.C. §45). Under FTC regulations the official rules of sweepstakes must include basic information including the retail value of the prize(s) offered and the odds of winning.

*These values have been added to the chart after speaking with a NC “Education” Lottery representative. Otherwise, the Lottery website does not provide clear ratios of the gambler’s odds of winning verses their expected prize.

The odds of winning ANY prize (including the $4 prize) is 1 in 25.

Below are two examples of the odds of winning $100:

Match 4 out of 5 white balls but not match the Powerball (Payout = $100)

The number of ways 4 of the 5 winning numbers on your lottery ticket can match the 5 white balls is COMBIN(5,4) = 5. The number of ways the losing white number on your ticket can match any of the 64 losing numbers is COMBIN(64,1) = 64.  The number of ways your Powerball number can miss matching the single Powerball number is: COMBIN(25,1) = 25. The product of these is the number of ways you can win this configuration:  COMBIN(5,4) x COMBIN(64,1) x COMBIN(25,1) = 8,000. The probability of success is thus: 8,000/292,201,338 ~= 0.00002738 or “One chance in 36,525.17”.

Match 3 out of 5 white balls and match the Powerball (Payout = $100)

The number of ways 3 of the 5 winning numbers on your lottery ticket can match the 5 white balls is COMBIN(5,3) = 10. The number of ways the 2 losing white numbers on your ticket can match any of the 64 losing white numbers is COMBIN(64,2) = 2,016.  The number of ways your Powerball number can match the single Powerball number is: COMBIN(1,1) = 1. The product of these is the number of ways you can win this configuration:  COMBIN(5,3) x COMBIN(64,2) x COMBIN(1,1) = 20,160. The probability of success is thus: 20,160/292,201,338 ~= 0.00006899 or “One chance in 14,494.11”.

See http://www.durangobill.com/PowerballOdds.html.


 

The troubling lottery reality behind the Powerball fever

By Chris Fitzsimon, N.C. Policy Watch

The lottery has been in the news nonstop for the last couple of weeks as the Powerball jackpot rose to almost $1.5 billion. There have been interviews with people buying tickets and quotes from store clerks selling them and even advice on what to do if you win, though the odds are decidedly against it, roughly one in 300 million.

The lottery industry loves it all of course, more excitement means more players and more cash for the companies who make the tickets and the machines.

State lotteries like ours in North Carolina like it too. Higher jackpots mean more media coverage and more sales and sales is the only way they judge success. One lottery official told the Charlotte Observer that it is indeed “an exciting time for us at the lottery.”

The Powerball frenzy has prompted some news outlets to remind their audiences where the lottery proceeds go in North Carolina, to support staff at schools, PreK programs, college scholarships and school construction.

Lawmakers have changed that formula in recent years and in the last two sessions have considered increasing the amount the lottery spends on advertising its games but thankfully have decided against it.

But it’s still troubling that how many kids get a college scholarship or have access to PreK programs depends in part on how many people the lottery can convince to buy tickets whether they can afford to buy them or not.

It’s also worth remembering that the state spends $500 less per capita on education than it spent in 2008 even with the growth in sales of the “education lottery.”

Left out of many of the stories is where the lottery proceeds come from—who plays and where do they live. A report by NC Policy Watch two years ago found that the ten counties with the highest lottery ticket sales per capita were clustered in low-income areas in the eastern part of the state.

The top counties in per capita sales all had poverty rates of more than 20 percent. In Halifax County where the poverty rate was pushing 30 percent, residents were spending almost $600 a year.

Those are the same counties where federal food stamp benefits are being cut off thanks to the General Assembly, where the cuts to unemployment compensation for laid off workers are most painfully felt, and where the elimination of the state Earned Income Tax Credit hits home for many low-wage working families.

And much of the lottery spending isn’t on Powerball tickets anyway, but on daily scratch off games that are aggressively marketed. It’s not hard to see that the advertising works, with huddles of low-income folks scratching off ticket after ticket in the corners of convenience stores across the state.

Lottery officials don’t keep data on who plays. They’d rather not know apparently, but studies in other states and the Policy Watch report make it fairly obvious who is playing the most, people most desperate to improve their financial situation who are also people who can least afford to respond to the ubiquitous lottery ads and waste their hard-earned money.

Lottery officials don’t seem to think about that much and told WUNC radio that they are just trying to run “fun games to help a good cause.” Sounds like a harmless church raffle, until you consider the plight of many of the people playing and the amount of advertising the lottery uses to entice them.

Lottery defenders always point to the education programs the proceeds support as justification for the state being in the huckster business, but we have a revenue system that is supposed to support education and other vital state services.

Instead we rely on people in Halifax County spending $600 a year to help fund our schools. That was true before the Powerball jackpot reached a billion dollars and it will be true after the jackpot is gone.

Desperate folks in the poorest counties will still be huddled in the corners of the stores scratching off ticket after ticket hoping to strike it rich.

Lottery officials are counting on it.

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