MENUWhy I’d Rather Gamble at a Casino than Play the Lottery
By Randy Ray
Published on August 17, 2015
Published on August 17, 2015
It’s hard to imagine that as recently as 1964, the lottery was illegal throughout the United States. Now the lottery is available in 44 of 50 states.
But I’d rather play at a casino any day of the week.
In fact, it might surprise you to know that I’m dead set against the lottery.
Here’s why I’d rather gamble at a casino:
States spend half a billion dollars a year on advertising the lottery.
You read that right—half a BILLION. That’s $500 million. It looks more impressive when you include all the 0s:
$500,000,000.00
When you look at their return on investment on that advertising spend, you’ll see why they’re willing to spend that kind of money. In 2013, lottery sales were $68 billion dollars.
Again, that’s more impressive if you include all the 0s:
$68,000,000,000.00
How much is $68 billion?
If you took all of the money Americans spent on movie tickets, music, the NFL, MLB, and video games, you still wouldn’t have as much money as Americans spent on the lottery.
Here’s the problem with that:
Why is the United States government running a gambling business?
In fact, some states are not only running a gambling business, they’re maintaining a monopoly on that business. Look at Texas, for example. You’ll find no casinos here, but you can buy lottery tickets at almost any gas station in the state.
Most voters don’t think of the lottery as a state-run casino, though. That’s because the lottery advertising presents the lottery as some kind of charitable enterprise. In fact, the advertising would have you believe that every penny you spend on the lottery goes toward educating the state’s students.
But that ain’t what happens.
Obviously, the states have to buy advertising. That’s $500 million of lottery money that isn’t going toward education right there.
The states also have to pay winners. Luckily, the payout percentage for the lottery is abysmal at 50%. So even if you assume that they’re paying out half of that $68 billion in prize money—and they’re not—that’s another $34 billion that’s not going toward education. Administration and overhead eat up some of that money, too—after all, the government officials running the state gambling business have to eat, too. I don’t have access to statistics about how much that costs, though.
The big fallacy is that the states have a way of earmarking this money toward education. In other words, if a state launches a lottery, and it sells $2 billion worth of tickets, that money is supposed to be spent on education. But it doesn’t. It just goes into the state treasury.
Sure, some of it is spent on education.
But if you look at the before and after stats for states which have launched lotteries, you’ll see that most of them spend no more on education after launching a lottery than before.
Studies show that poor people spend a higher percentage of their income buying lottery tickets than wealthy people. I think of the lottery as an additional form of tax on the working poor, many of whom are already poorly educated. They’re desperate, and the state’s advertising plays on this desperation by offering them a way out.
The problem is that the odds of winning the lottery are awful. Your chances of winning one of those huge jackpots are outlandishly small. The odds of winning a million dollars or more are 1 in 176 million.
You’re more likely to be hit by lightning than to win one of these jackpots.
And the smaller prize games aren’t better. Since the payout percentage overall for the lottery is 50%, that means every time you buy a lottery ticket for $1, you’re probably—over time and in the long run—only going to win back 50 cents of that dollar.
Most of the data above was taken from John Oliver’s recent episode of Last Week Tonight. It’s about 15 minutes long, but he’s far more entertaining than I am at relating these facts.
Oliver came to the conclusion that the lottery is like alcohol. Sure, people like it, and it shouldn’t be illegal.
But the government shouldn’t be running a business selling alcohol.
I agree with him.
Here’s the other problem with the lottery:
The payout percentage is garbage. No one should play a game with a house edge that large. In fact, most people probably wouldn’t play a game with that kind of house edge—unless it were the only game in town.
In places like Texas, the lottery really IS the only game in town.
But casinos have to offer a better gamble to remain competitive. Here’s how the house edge for most casino games stacks up against the lottery:
These are just a random walk through the casino’s games. You can see that you have a lot of choice when it comes to games and their odds at a casino. In almost all these cases, you know that the payback percentage is, though. The information is readily available.
More importantly, these odds are dramatically better for the player. Would you rather trade a $100 bill for a $50 bill? Or would you rather trade a $100 bill and get back $99.50?
I’ve seen gambling at a casino compared with going to the movies or buying tickets to a concert. The idea is that these activities are all meant to trade money for entertainment, and they do.
You can buy a ticket to a movie for $10 or so. If the movie is 2 hours long, you’ve spent $5 per hour on entertainment.
You can buy tickets to a concert for as little as $15 or as much as $200. An average concert lasts for 2 or 3 hours, so you’re looking at spending between $5 per hour and $100 per hour for this kind of entertainment.
But gambling is a form of entertainment with a variable cost. And the great thing about casino gambling is that you control the variables.
Short term variance and randomness can make any trip to the casino deviate from the average, but for purposes of calculating your lifetime gambling costs, you would want to look at how much money you’re putting into action on an hourly basis and multiply that by the house edge for the game.
Baccarat is a relatively slow game at 15 hands per hour, but it’s usually played for high stakes. Assuming you’re playing for $50 per hand, you’re putting $750 per hour into action. With a house edge of near 1%, your cost for that hour’s entertainment is about $7.50.
Blackjack, on the other hand, is a quicker game, but you can usually play for lower stakes. Assuming you find a game with a quick dealer and not too many other players at the table, you can play 50 hands per hour. Assuming you bet $10 per hand, you’re putting $500 per hour into action. 0.5% of that is only $2.50 per hour—making blackjack more affordable than going to the movies.
Craps is a fast-paced game. You might see 100 rolls of the dice per hour. Assuming you’re playing for $10 per roll, you’re looking at $1000 per hour in action. At about 1%, you’re spending $10 per hour for your entertainment.
You can do these calculations for any casino game you want to play, including keno. In fact, keno is one of the slowest games in the casino. You might place 4 bets an hour at keno. At $5 per bet, you’re only putting $20 per hour into action. At 22%, you’re only losing $4 or $5 per hour on average.
Perceptive readers might think, well, I only buy one lottery ticket per week for $2. Even though the house edge is 50%, I’m only losing $1 for a week’s worth entertainment.
I would respond by asking you if you really got an entire week’s worth of entertainment for your $2. For most people, I don’t think so.
On the few occasions where I played the lottery, I watched the drawing, but it only took a couple of minutes. I don’t think $1 for 2 minutes worth of entertainment is a fair trade. That adds up to $30/hour in entertainment cost, which is more than the worst casino game mentioned above.
And casinos aren’t hypocritical about what they’re up to, either. If you go into a casino, the manager isn’t going to give you a song and dance about how your losses are going to educate children. Sure, they want you to think you might win. And you might win. That’s gambling.
Casinos also offer perks to players, and that’s worth thinking about, too. Even the lowest roller gets free drinks when playing. It doesn’t take a lot of action to get a coupon for a free buffet, either. If you really enjoy casino gambling, you can even earn free hotel stays and travel perks like airline tickets.
Good luck getting any of those kinds of perks out of the state government.
I don’t think gambling is a bad thing. On the contrary, gambling is a lot of fun when it’s done responsibly.
I just prefer gambling at a casino to playing the lottery. I don’t think the government has any business being in the gambling business—just as they don’t have any business being in the liquor business.
The lottery offers lousy odds, too. I might not be good enough at gambling to get the edge over the casino, but I KNOW I have a FAR better chance of coming home a winner from the casino than I do winning at the state lottery.
You might get a lot more entertainment out of that 2 minute drawing than I do.
But you should at least think about what you’re actually getting for your money.
I’d suggest that if you really want your money to support education, donate it somewhere. Don’t try to make it part of your gambling budget, because odds are, it won’t get used for education anyway.
At least when you’re gambling at a casino, you’ll know that you’re helping support a blackjack dealer or a cocktail waitress or something.
Fantastic blog post.Thanks Again. Great.