Lottery is the state-regulated form of gambling, and it has become a major source of revenue for many states. It’s easy to see why. In an anti-tax era, state governments have come to depend on “painless” lottery revenues, and they’re always looking for ways to increase them.

The federal law defines lottery as an arrangement whereby consideration is paid for a chance to win a prize, which can be money or anything else of value. Consideration can be either cash or a promise to pay something later. The prizes in a lottery are distributed by random selection of numbers or tickets, and the odds of winning are infinitesimal. Federal statutes prohibit the mailing or transportation of promotion for lotteries and lottery tickets in interstate or foreign commerce.

While the chances of winning are infinitesimal, people still play the lottery. They might buy a ticket for a few bucks, or they may invest thousands of dollars. The winner often chooses to receive the money all at once, or in installments, commonly referred to as annuity payments. The former option gives the winner an opportunity to invest some of the money and take advantage of compound interest. The latter option allows the winner to divvy up the payout, making it less likely that they’ll spend it all at once.

A recurring argument is that the lottery is good because it raises revenue for the state, but it’s important to remember that those revenues represent only a small fraction of overall state revenue. State officials should be careful not to adopt policies that are unsustainable.