Thursday, February 5, 2009

More Lottery Troubles

Lotteries were in the news a while back because of problems with insiders claiming many of the prizes. It turns out that the problem is worse than we thought according to CTV.

The Ontario Lottery and Gaming (Gambling?) corporation (OLG) has studied lottery wins over the last 13 years. Originally, they said that 1.7% of the money went to insiders, but they have now revised this to 3.4%. Of course, this should be viewed as a minimum because they can only report insider wins that they know about, and they couldn’t possibly know about all of them.

The suspicion is that not all of these insiders bought these winning tickets. No doubt the fraud took many forms, but the classic example given is the lottery player who hands a winning ticket to a convenience store clerk who either says the ticket didn’t win or says a prize amount that is smaller than the real prize.

It’s amazing that people get so worked up about insiders skimming 3.4% of the prizes but are unconcerned about the incredibly low prize payout of lottery tickets. Lotto 6/49 is designed to pay out only 45% of the take in prizes. With the lottery skimming 55% of the money, an extra percent or two for insiders doesn’t seem like such a big deal.

Compare the 55% skim in lotto 6/49 to the 1.4% skim in the dice game craps. Don’t take this as an endorsement of craps, though. You’ll lose your money if you play.

If numbers held any sway in the minds of lottery players, I suppose that they wouldn’t buy tickets. It’s the thought of some insider stealing their prize that has lottery players upset. In an attempt to rectify this perception problem, the OLG has announced a series of measures designed to prevent insider fraud.

So, now the poorest members of our society can safely continue to donate a disproportionate fraction of their income to lotteries without fear of an insider stealing the big prize that they will never win.


  1. I think outrage is thoroughly justified in this case. I agree with your take that the proportion of "stealing" would ultimately be small compared to the legal take of the OLG. But that shouldn't excuse stealing, whether from the rich or the poor. More shameful is OLG's unwillingness to act until the media raised a stink. It is bad enough that OLG makes money from the poor; it is worse when these people are cheated out of the money that is due to them and given the run around when they tried to complain. What I'd like to see is store owners prosecuted and OLG management held to account for their inaction on this issue.

  2. Canadian Capitalist: When I focus on those who stole the lottery winnings, I feel the outrage that you describe. When I focus on OLG management, I feel more of a sense of hopelessness. Of course you are right that they stood by knowing this was going on and did nothing until forced to by the media. I see little chance that OLG management will be held to account. The best way for them to get what they have coming is for people to stop buying lottery tickets.

  3. Here in Manitoba, people are now instructed to sign their tickets. Also, when a winning ticket is scanned, the machine says "Woohoo!". I think there may also be scanning machines for direct customer use.

    It's definitely in the regulators interest to ensure the wins are legitimate. People might not know or understand the lottery's payout ratio, but if they fear theft at the sales level, they're less likely to buy tickets.