I mean, how can they afford to pay someone, say 345 million dollars, after winning?
In: Other
Step 1: Sell 345 million tickets worth $2 a piece.
Step 2: You’ve made $690 million dollars.
Step 3: Pay out half the value to the winner, or $345 million.
Step 4: $345 million in profit.
Ticket sales! A lot of people buy tickets, especially when the pot gets high. Typically, half the money collected goes to prizes and half goes to whatever government agency the money is earmarked for (often education).
By selling more than $345m in tickets!
Look, the lottery is a tax on people who can’t do math and people who like to gamble. Most tickets win nothing. Lotteries are run by the Government (at least in the US) so they aren’t exactly hurting for cash if they have a run of winners, but for the most part the lotteries can self fund.
Ticket sales. The jackpot might only be won once every few drawings, and a lot of people are willing to purchase tickets in hopes of winning.
From everyone buying lottery tickets. A typical lottery system returns about 50% of the money that people pay for tickets, as prize money. It’s easy to pay out 345 million dollar in prize money if people bought 790 million dollars worth of lottery tickets.
The profits are always way more than what they give out. The lottery will always profit big so they can continue to give “big.” Even though what they’re giving out is probably nothing for them.
Let’s say you have a 6 sided dice.
You sell 6 different people a ticket with 1-6 on it for $2 each.
So there is only 6 possible outcomes and 6 people spent $12 on it
So it rolls and someone wins..you give them $6.
The lottery is like that except millions of dice. Governments basically take all the ticket sales cut them by around 25% and that is the jackpot.
If multiple people win they split the jackpot. The lottery itself cannot lose. So lots of governments run them.
In addition to what a lot of other people have said, the lottery doesn’t have the entire pot of money ready to give the winner. They promise to give $345 million in installment payments over 20 years. You can also choose to take the cash payout, which is a large nut up front, but smaller than the advertised jackpot. People often opt for this because they think they can make more money in the long run than wait for the installment payments.
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