"Only in Illinois can we fail at gambling. Why don't we just hire the mob to run it for us? They have done well in that area." Jake Hartford, WLS radio personality.


Kathy Posner

The first recorded signs of a lottery are keno slips from the Chinese Han Dynasty between 205 and 187 B.C. These lotteries are believed to have helped to finance major government projects like the Great Wall of China. Illegal lottery or the “numbers game” came to the United States prior to the Civil War. Because bookies could extend credit to bettors and winners could avoid income taxes on the winnings, people in poorer communities were drawn to what were known as policy shops. The word policy was used to describe the establishments from a similarity to cheap life insurance, both seen as a gamble on the future.

With a three number bet, the exact odds of picking the correct number are 999:1 and since the typical payoff rate was 600:1, the 40% profit, known as vigorish, was enormous for the racketeers. A bookie would have runners and sub runners who earned a percentage of the daily bets they collected which left about a 30% profit for the bookie. He made a lot of money from his 30%

In 1875, a report of a select committee of the New York State Assembly, stated that "the lowest, meanest, worst form ... [that] gambling takes in the city of New York, is what is known as policy playing.” So with a 40% hold the Mob earned millions and millions of dollars. They spent no money on advertising, fancy offices and employees. The runners and sub-runners were essentially outside contractors with no overhead.

In Illinois, the lottery has a 50% vigorish on the pick numbers games and pays out 58.7% overall as stated in their audited annual report; yet we read stories that the system is floundering! The state instituted the lottery in 1974 with the first tickets being sold on July 30th. For more background, the history of the Illinois lottery can be found here....

According to the Chicago Tribune, “The Illinois Lottery has reached annual sales of more than $2.2 billion a year. Last year, the lottery contributed $625 million to schools and another $32 million to the statewide construction program for schools, bridges and roads. “Now think carefully and read slowly my explanation of the numbers. If the payoff is 50%, that would mean the lottery had a pre-operating expenses profit of $1.1 billion. According to the latest filed audited report which is for the year ended 2008, the lottery contributed $643 million to the common school fund; which we know really goes straight into the state’s operating budget.

Here is how the money was actually distributed in 2008:

-- $1.226 billion in prize winning expense (that's 58.7% of revenue)

-- $153 million in commission and fees expense (7.3% of revenue)

-- 5% goes to agents, 2.1% independent contractors and .2% distributors)

-- $60 million other operating expense

Transfers out:

--$643 million to common school fund

--$1.4 million for ticket for cure

--$ 2.5 million for veterans funds

--$1.1 million for quality of life fund

Instead of Illinois trying to determine how to run the agency better, they are looking to sell the management to a private company. That is tantamount to admitting that the administration of a state agency is a failure! If that is correct, fix it, don’t out source it.

"Other states run their lotteries much better than we do. We are literally leaving hundreds of millions of dollars on the table," said Rep. Jack Franks, a Woodstock Democrat who oversaw hearings examining the potential sale of the lottery under former Governor Blagojevich. "But if we just ran it better, we would be able to realize the extra money. Why don't we keep it in-house, instead of giving our profits to a private manager?"

Franks is correct in his assessment that the state should run the lottery, but I am still upset how the lottery is basically a gambling scam because of the pathetic return to the bettor on the money they wagered. Illinois, and other states, market the lottery to the poorest neighborhoods.

To put the “house edge” in the lottery in prospective to other gambling games, one should know what they are to be able to make a comparison. If one is playing in a casino, the game with the lowest hold is craps (double odds) at 0.60%; blackjack’s hold is 0.80%, roulette (single zero) is 2.7%, roulette (double zero) is 5.6% and keno has the worst odds at 25%. Casino’s in Illinois are taxed at an onerous rate and are hugely successful. The lottery holds 50%, pays no taxes on its winnings and still returns a profit to the taxpayers at a pathetic amount.

The lottery’s advertising is centered around winning a dream, but the system is really a nightmare.

Editors Note: The lottery is a sham. Schools make very little because the states know that a certain amount of money is coming from the lottery. They then budget less in state aid for the schools, knowing the lottery will make it up. So in the long run, schools get very little benefit from the lottery system, but they are able to say how much money the lottery system gave to the schools and programs. The system is really robbing Peter to pay Paul.

Read more from Kathy Posner here......