15 Myths Debunked: Facts About the Lottery

Lots of myths and outright fallacies exist about lotteries. Some started decades ago. Many were disproven many times over.

But they continue to spread anyway.

The advent of the internet only fueled the perpetuation of these lies. Some now believe these lies as gospel truth.

But the facts are incontrovertible.

Usually, you can find the truth about these myths on official lottery sites.

But conspiracy-minded people don’t believe them. They claim bias because they sell the tickets.

People can also go to sites like Snopes. Snopes is a site dedicated to dispelling myths and providing facts when available. Once again, though, some people claim political bias on Snopes behalf. They claim that this bias negates any information that the site provides.

Other times, people pass the information along on the internet without ever verifying. Once the information passes to a friend, the cycle repeats.

The truth is out there, and I look to dispel some of these myths. I don’t work for a lottery. I’m not an employee of any government. I’ve no skin in the game whatsoever. I’m here to provide information.

Myth #1 – The Lottery Is a Tax

One of the biggest myths out in the ether is that the lottery is a tax. I hear statements like “it’s a voluntary tax” or “it’s a sneaky tax”. Nothing could be further from the truth.

So let’s look at the word tax.

The Oxford Dictionary defines a tax as:

“A compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.”

Two keywords are important in this definition. The first important word is “compulsory” which means “Required by law or a rule; obligatory”. The second important word to notice is “levied”. To levy means to “impose or require”.

No one forces anyone to buy a lottery ticket in any way, shape, or form. No person has a legal obligation to buy a ticket. No authority is imposing criminal sanctions on anyone for not purchasing one.

If anyone makes the taxation argument to you, show them the meaning of those words.

Myth #2 – Big Jackpot Winners Are Set for Life

Let me preface this. I’m only referring to big jackpot winners, people who’ve won $10 million or more. Of course, some people win 1 or 2 million dollars, but that may only last a few years.

At least 2 studies have disproven this statement. One study from the Camelot Group, the administrators for the United Kingdom National Lottery, found that over 40% of winners wound up losing their fortunes within a few years. Another study from the National Endowment for Financial Education (NEFE) found that almost 70% of winners file for bankruptcy within a few years.

The higher number for the NEFE may take into account all bankruptcies. If so, this includes reorganization bankruptcy which allows negotiation and reorganization of debts. So the person may only be broke, “on paper” and is trying to get better deals.

This was a tactic used by United States President Donald Trump in his bankruptcy filings. The procedure allowed him to keep most of his assets and renegotiate with creditors. But, NEFE doesn’t state whether they’re taking reorganization into account in this figure.

Myth #3 – Always Take the Annual Payment Option

In the US, players have the option of taking a lump sum payment or payments over a 20 or 30 year period. Usually, people who take the lump sum payments get about ½ of the advertised amount.

Then the winner must pay taxes on the winnings. In some jurisdictions, the tax may be as high as 50%. The lottery commissions must take out these funds before issuing the winnings.

So that $40 million win becomes $10 million.

Some people think that taking the annual payment option is better. Arguments for taking the annual payments include lower taxes and more money. If the jackpot is $1 million and the lump sum is $600,000, they feel they lose money.

Another argument is that you have guaranteed income for the duration of the annuity. So if you blow the first payment in a few months, you’ll still have next year to count on.

In reality, by waiting, you lose money. The interest you can gain over that 20 or 30 year period will be far more than the money that you’re waiting on.

Also, no one knows the future. The possibility of you dying before the annuity finishes paying out is real. In that scenario, your heirs will have to pay income taxes on the money and pay an inheritance tax as well.

So, to avoid all that and maximize your winnings, take the lump sum payment.

Myth #4 – If You Win, No One Has to Know

This is another myth. The lottery commissions in each state are government agencies. They’re required under the Freedom of Information Act (FOIA) to declare winners.

For some states, this is a hard and fast rule. They release the winner’s name, address, and may even require a photo.

But, some states will allow a winner to form a trust.

A living trust transfers the winnings to the trust, which is like a holding company. The trust is then run by a trustee or executor. The winner or the lawyer can serve as the main trustee. Either way, the trustee can remove the money as he or she likes from the trust at any time and give it to anyone.

When forming a trust, the lawyer selects a name for it, such as Acme Trust. When the states go to publish the winner, Acme Trust is the winner’s name and the address is usually a lawyer’s office.

Not all states will pay winnings to a trust. In these states, if you win, public disclosure is required to collect your winnings.

Myth #5 – Winners Quit Their Jobs

Winning can give a person the financial freedom that they’ve been looking for all his or her life.

But the numbers dispute the assertion that everyone stops working.

A Gallup poll once asked participants that if they won $10 million, would they keep their job. An astounding 67% said they’d keep working.

Another study from the Camelot Group found that 48% of jackpot winners continue to work.

Neither study revealed if the participants would stay at the same job. It’s possible that winners would quit and start their own company.

Despite winning the jackpot, people want to work.

Myth #6 – Always Sign the Ticket

The back of all lottery tickets in the United States has a place for a signature. This is to prove that you own the ticket. If someone else finds the ticket and it’s signed, they can’t claim your prize.

But what about remaining anonymous?

A woman in New Hampshire won a Powerball jackpot worth $560 million in early 2018. She immediately signed the ticket so no one else could claim her winnings.

Due to the signature, the lottery commission wouldn’t let a trust claim the winnings. They told her that releasing her identity was required to release the funds.

That set off a lawsuit. The woman, known only as Jane Doe, sued the State of New Hampshire. Her goal was to remain anonymous and collect the $560 million.

Her argument was that she was an older lady. By releasing her name and the city she lived in, it put her at significant risk and danger.

The court ruled in her favor on the name part of the suit.

The ruling stated:

“The Court has no doubts whatsoever that should Ms. Doe’s identity be revealed, she will be subject to an alarming amount of harassment, solicitation and unwanted communications,”

The court did say that the state could release the city she lived in:

“Given that any [female] person in Ms. Doe’s hometown could potentially be the winner, it’s highly unlikely that Ms. Doe could be identified as the winner solely based on the disclosure of that limited piece of information.”

She was then able to collect her winnings anonymously.

But this is an exception.

If you win any amount that’s less than the total jackpot, sign it, because in most cases, it won’t matter. Your identity is public, but 10,000 other winners get lumped in with you.

If you hit the big jackpot, immediately make a photocopy. Don’t tell anyone you’ve won. Head to your trusted lawyer’s office.

Have their office make all the arrangements to stay anonymous before you claim the prize.

Myth #7 – People Only Hear about the Big Jackpots

The second prize on Powerball got a lot of publicity in one case.

On March 30, 2005, the bi-weekly Powerball numbers were drawn. The winning numbers were 22, 28, 32, 33, 39, and 42.

The next day, the reports started coming in from lotteries around the country. When all totaled, there were 110 winners of the second place jackpot.

They all had the same numbers: 22, 28, 32, 33, 39, and 40.

The company that runs the Powerball lottery, Multi-State Lottery Association (MUSL) suspected some sort of cheating or fraud.

They immediately froze the $19.4 million in prize money until they could figure out what was going on.

The investigation found that a fortune cookie company, Wonton Food Inc. of Long Island, New York, printed the 22, 28, 32, 33, 39, and 40 on the back of thousands of fortunes.

MUSL investigated and verified that no one associated with the Wonton Food won. So the lotteries paid out $100,000 each to 89 winners and $500,000 to the other 21 winners who chose the Power Play option.

If the fortune had the number 42 instead of 40 on it, the winners would have won a little over $225,000 each.

As a side note, the fortune of the reverse side of the lottery numbers was interesting. It read “All the preparation you’ve done will finally be paying off”.

Myth #8 – The Movie with Nick Cage was Made Up

In the movie It Could Happen to You, Nicholas Cage plays a cop. He stops in at a diner and realizes he doesn’t have enough to tip. He promises his waitress that if the lottery ticket he has is a winner, he’d split the winnings with her. If it lost, he’d be back the next day and give her a tip.

The waitress, played by Bridget Fonda, doesn’t believe any of it. She writes Cage’s character off as someone who stiffed her.

When Cage wins, he follows through on his promise.

A real-life situation inspired the story.

In this case, a police officer promised to share his lottery ticket winnings if the number hit. It hit.

The cop called the waitress on April Fool’s Day, and she thought it was a joke. It turns out it wasn’t, and the 2 split a $6 million jackpot.

Myth #9 – I Have a Better Chance of Being Killed by Lightning than Winning the Lottery

We’ve all heard this phrase. We all tend to believe it.

But it’s incorrect.

A physicist, who also happened to be a former Iowa Lottery commissioner, proved it. His name is Dr. Ed Stanek.

Using statistics provided by the North American Association of State and Provincial Lotteries (NASPL), Stanek set out to find out if the saying was true or not.

Stanek discovered that in 1996, the total number of people killed by lightning was 91.

In that same year, 1,136 won over $1,000,000 in lotteries in North America. Also, another 4,520 won $100,000 – $999.999 playing the lottery.

So you’re 50 times more likely to win the lottery than to die as a result of lightning.

Myth #10 – Lotteries Prey on Poor People

This is also a myth. Poor people are a low incidence group for playing the lottery.

A poll by the Gallup was one of many that disproved this myth.

The poll found that people with incomes less than $25,000 were the least likely to play. They found that the $45,000 – $75,000 income group was the most likely to play, with 65% playing in the previous 12 months. Another finding involved people with incomes over $75,000. The poll found they spent over 3 times the amount on lottery tickets than those with income under $25,000.

Also, if this were the case, then lotteries have a horrible marketing plan.

Why target people that can’t buy tickets?

It makes more sense to target middle-income earners to play.

Myth #11 – Only Winners Benefit from the Lottery

This is another false statement I hear a lot. The reality is that lotteries make money for lots of people. It’s not only the winners that benefit.

All these people benefit too (as do many more):

• The store that sells the ticket gets a percentage of sales and a cut of any winnings over a certain amount
• The lottery machine manufacturer
• The team that created the software to run the machines
• The people that install and maintain the machines
• The lottery marketing teams
• Websites that advertise the lottery
• TV stations that advertise the lottery
• Radio stations that advertise the lottery
• The companies that make the special paper the for the tickets
• The companies that design the scratch-off tickets
• The delivery companies that deliver the tickets

Of course, the state gets a cut. Most use it as a revenue source to keep taxes lower in the state. Some go to a certain aspect of the budget such as education or public works. Other states combine it with general funds and use the money where it’s needed.

So everyone benefits from the lottery.

Myth #12 – I Can Beat the Odds with a System

Some people think that they can develop a system to win the lottery.

I hear statements like:

• My chances of winning increase when fewer people play
• If I play “hot” or “cold” numbers, I have a better chance of winning
• If it’s a big jackpot I have a better chance of winning
• If I play the same number each week, it’s bound to hit

All that’s malarkey. Odds of winning the big jackpot are 1 in 300,000,000 in most cases. It varies per game, but let’s use that as our number.

None of any of the above statements will change that.

The machine that selects the winning numbers undergoes several inspections. These inspections happen before each drawing. The purpose is to ensure fairness. If any of the statements were correct, it would involve a malfunction or some sort of fraud. The lotteries couldn’t continue to operate if any of those statements were true.

Myth #13 – No One Can Win a Big Jackpot Twice

In June 2017, a 19-year-old from California named Rosa Dominguez won $555,555 on a scratch-off ticket. A few days later, she tried her luck again and won another scratch-off ticket and won $100,000 for a total of $655,555.

In another case, Kimberly Morris of North Carolina bought a scratch-off ticket and won $10,000. Feeling lucky as she was driving home, she stopped off at another store. She bought another scratch-off ticket and won another $1,000,000.

When she cashed in, she had the choice of 20 annual payments of $50,000 for the $1,000,000 ticket or a lump sum of over $600,000. She took the lump sum and took home over $400,000 after taxes.

In a case of science over luck, former Stanford statistics professor Joan Ginther won the Texas Lottery 4 times in a little under 20 years. She’s won a total of $20.5 million.

People suspect that she figured out the algorithm for which tickets are winners. They also suspect she cracked the code for the delivery schedule since it was static.

The Texas Lottery Commission has said they don’t suspect foul play and that she’s just a very lucky person.

Myth #14 The Odds of Winning a Powerball or Mega Millions Jackpot Are the Same

Because Powerball and Mega Millions are different games with different rules, they have different odds.

The odds for winning the Mega Millions jackpot are 1 in 302,575,350.

The odds for winning the Powerball jackpot are 1 in 292,201,338.

Those numbers may seem close in the grand scheme of things, but 10,347,012 is a big difference.

Would you play a casino game where the odds of winning were 1 in 10 million?

But they have some similarities.

Both Powerball and Mega Millions have had jackpots over $1.5 billion for one drawing.

On January 13, 2016, 3 winners shared the biggest jackpot in lottery history. The total jackpot was $1.58 billion. The lump sum payout was $983.5 million.

Two and a half years later, Powerball’s sister game Mega Millions grew to $1.54 billion. The lump sum totaled $877.8 million. A single winner from South Carolina purchased the ticket. It’s the largest single-ticket win in lottery history.

When you compare the top 10 winners, you can see why that 10,347,012 difference matters. The top 10 biggest jackpots, the game, and the dates of the drawings are:

• $1.586 billion – Powerball – 1/13/2016
• $1.537 billion – Mega Millions – 10/23/2018
• $758.7 million – Powerball – 8/23/2017
• $687.8 million – Powerball – 10/27/2018
• $656 million – Mega Millions – 3/30/2012
• $648 million – Mega Millions – 12/17/2013
• $590.5 million – Powerball – 5/18/2013
• $587.5 million – Powerball – 11/28/2012
• $564.1 million – Powerball – 2/11/2015
• $559.7 million – Powerball – 1/6/2018

          

As you can see, the game with the better odds, Powerball, has more jackpots in the top 10.

Myth #15 – The Lottery Has to Pay if You Have a Winning Ticket

The lottery must be on the up and up for many reasons. These include:

• They’re a government agency
• Billions of dollars flow through the system each year
• Millions of players expect fairness
• Any type of fraud in the lottery system can put a massive dent in the economy if a breach of the public trust occurs.

Anytime a suspicion of wrongdoing exists, lottery officials investigate.

But what happens if they determine fraud?

That was the case of an Oregon woman in 2005. The woman in question won $1 million. But officials learned that the woman used a stolen credit card to buy the winning ticket.

The stolen card was that of her dead mother in law. She not only bought the ticket with the card, but she also racked up $12,000 in purchases.

She wasn’t allowed to collect the winnings. Instead, the state lottery commission awarded the $1 million to the Medford Oregon Police Department for discovering the fraud.

Conclusion

As you can see, a lot of misinformation exists out there.

I hope you’ll take a few things away from this post. First, the clarifications of the myths that dispelled. Second, that you enjoyed the facts presented.

But the most important take away is to check your sources. And don’t trust only one website (unless it’s an official site like a lottery commission).

Look deeper into the story to find out the truth.

When you come across some crazy false story on Facebook or Twitter, show the proof to the person posting.

This way they know that you’re presenting facts, not rumors and innuendo.