Sorry but that is 100% wrong.
If you are down 40% then you can’t be up 15%.

Cash Windfall was an EVEN-MORE highly-regressive tax than other lotteries.

This is a terrible post.

The losers from non-jackpot weeks were subsidising the professionals.

If the professionals hadn’t played then the regular non-professionals would have shared more of the tickle-down from the had-to-be-won jackpot money.

This is very simple maths.

Sorry but that is 100% wrong.
If you are down 40% then you can’t be up 15%.

Cash Windfall was an EVEN-MORE highly-regressive tax than other lotteries.

This is a terrible post.

The losers from non-jackpot weeks were subsidising the professionals.

If the professionals hadn’t played then the regular non-professionals would have shared more of the tickle-down from the had-to-be-won jackpot money.

This is very simple maths.

Sorry but that is 100% wrong.
If you are down 40% then you can’t be up 15%.

Cash Windfall was an EVEN-MORE highly-regressive tax than other lotteries.

This is a terrible post.

The losers from non-jackpot weeks were subsidising the professionals.

If the professionals hadn’t played then the regular non-professionals would have shared more of the tickle-down from the had-to-be-won jackpot money.

This is very simple maths.

The Massachusetts Lottery is a crooked organization, a tool for the self-enrichment of political hacks. So I definitely am inclined to treat anything they do with skepticism.

But beyond that, I disagree that the purpose of the state lottery should be to maximize revenues. If it provides a legitimate service by offering an honest game, then that ought to be the focus. The money raised should be secondary.

The outrage doesn’t come from the state not making enough money. It comes from the fact that having access to extra capital increases the probability of winning disproportionately, such that your expected payout is positive; and that payout comes at the expense of people who can’t follow the same strategy. Sure, only buying tickets on the roll down weeks would have expected positive return, but you can’t depend on actually making a profit in a reasonable timescale without buying a whole lot of tickets.

The state of Mass advantaged itself in two ways:

#1 even before the game changing globe articles the word was out on the street that orginized syndicates were playing the lottery because it was “profitable.” This pulled in tens of thousands of small fish.

#2 Lots of the “smart money” was comming in from out of state. It’s rare for a state to pull in serious outside money into a local lottery. This point was slyly left out of the inspector generals report Mass was tickled pink that out of state players were dumping money into Mass.

Curmudgeon, Nathan is already subtracting the $40M from the revenues. You can forgo that revenue, and by reducing the payout rate come up with a scenario that is still better for both the small-time gamblers and for the state.

Felix may be right that this approach is attractive to lottery officials. They aren’t interested in giving money to the towns. They aren’t interested in returning money to their bettors. Their sole interest is to increase the revenue stream, and thereby justify their own worthless lives. (I take that back. They are occasionally interested in funding their political campaigns with those revenues under the guise of “advertising”.)

It’s better for both the state and the small time players for the lottery to be structured better and have $260m in revenue than it is to have the existing structure and an additional $40m in revenue from sophisticated players.

The existing structure may have maximizing lottery tickets sales, but that is not the goal. The goal is to maximize proceeds to the state and that goal was not achieved.

Those picayune transactions, as you call them, actually matter if you want the state-owned gambling industry to be both fair and perceived to be fair. You want to build a lottery game that facilitates large consortiums and creates business practices to make it easy, that’s one thing. But to let proprietors of the stores in which lottery tickets are being sold cut corners on their own, that starts to create the beginnings of a corrupt environment. And that’s just something I don’t want my government doing.

However, if the return on investment for sophisticated gamblers is positive (as suggested in the article), then it is also an analytic truth that the government cannot be earning revenue from that segment – the effective payout is 120%! This tension can only be resolved if professional gamblers buying tickets reduces the prize payout experienced by other players. If we assume the pros earn back 20% and the government gets 40% of the ticket price, a pro purchasing a $1 ticket results in a 20 cent transfer from existing unsophisticated ticketholders to the pro, and a 40 cent transfer from existing unsophisticated ticketholders to the state. The pros increase government revenue, but it is not them who pay for it. Quite the opposite.

To sum up: participation by rich, sophisticated gamblers does increase government revenue, but the revenue doesn’t come from them. It comes from the fact that their participation make the odds worse for unsophisticated players. This is the only way to reconcile the positive ROI for that segment with the structure of the game, and that’s why someone might be inclined to think it is an objectionable structure.

For example, if the stated evened out the payout scheme and increased the rake to 48% then the revenue would have been $260M instead of $300M. Of this, $124.8M would go to the towns (an increase of $4.8M) and $135.2M would go to the small time players (an increase of $3.2M). Everyone wins, except for the sophisticated investors.