When The Lottery Is Actually A Winning Proposition

There was a very interesting story from the Boston Globe on Sunday about how a few folks managed to virtually guarantee winning hundreds of thousands of dollars on a Massachusetts lottery ticket game due to how the jackpot rolled over if it went unclaimed long enough. The statistics worked out well if you bought at least $100,000 in tickets during a 3-day window every few months.

Just three “investment groups” collected 1,105 of the 1,605 prizes statewide after a May drawing – two of which were run by former Computer Science students at MIT and Northeastern University. One couple bought over $600,000 worth of tickets this year and have won over $1,000,000 in return. See kids, math is cool!

Also of interest was the fact that state officials have known about this “loophole” for years, but have only done something to stop it after negative media attention arose. After the story broke, it was quickly announced that any lottery sales agent could only sell $5,000 of tickets in a single day. Finally, the entire game was announced to be phased out next year.

Comments

  1. Paid $600,000, won $1 million. Good deal? Not after taxes.

  2. I wonder how taxes factor into this? Your gambling winnings are taxed, but you can’t deduct your gambling expenses, as far as I know. That means, winning $1 million and spending $600K may not provide much of an after-tax gain since much of that money would be taxed at the highest marginal rate.

  3. It is my understanding that you can deduct your losses only and up to the amount of your gains. Therefore, they likely only have to pay taxes on the $400k difference.

  4. You can deduct your losses (expenses) up to your gains. I’d happily pay taxes on 400k. :)

  5. OK, but the other 99% of the time, the lottery is roughly a -50% return, which is the all time worst “investment” you could make.

  6. The media ruins everything…

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