Betting On It: Is Funding Education through the Lottery Predatory Gambling?

,Last updated September 8, 2016

The California Lottery wants to be number one, and they are betting on data analytics to get there . After all, that is what the best retailers in the world do. Companies like Amazon , Google , Apple, and others gather consumer data into piles known as big data (data in amounts too large to be stored and analyzed by a single computer) and analyze it to predict buyer behavior.

Even those retail giants come in second to the biggest harvester of big data though. Number one is the government, and between state and Federal agencies plus local municipalities, there is a lot of data out there about each of us, not to mention what we share voluntarily through fitness apps, location data, and more.

What are they doing with all that data? In California, the Lottery Commission intends to use it to sell more lottery tickets. After all, the lottery helps fund education, right? What could be wrong with raising more funds for schools?

Where the Money Goes

Where does the money from lottery sales really go? Los Angeles Channel Seven reports that 25 to 30 cents of every dollar spent on Powerball tickets in the state goes to public education.

The California Lottery raised more than $1.39 billion for schools in the 2014-2015 fiscal year. Lt. Governor Gavin Newsom, who is critical of the system, says its misleading because people believe more of the money is going to public education than, in fact, is. At the end of the day, its not insignificant, but its hardly significant. I just think it is a crass thing. Despite Newsomes skepticism, and that of other key political figures, there are those who believe it makes a meaningful contribution.

The California Lottery was created to supplement public schools. Not to totally fund public schools, not to resolve all their problems. It was to supplement their budgets. So we dont do a lot for schools, its a modest contribution, California Lottery spokesperson Russ Lopez replied.

Despite the debate about how significant or insignificant the lotterys contribution to education might be, its hard to dispute the argument that in underfunded schools, every little bit helps.

Where the Money Comes From

Regardless of exactly how much of the funding goes where, there is a larger question: where does it come from? Who is buying these lottery tickets?

The data the Lottery is using to better their sales also tells another tale, not just of gambling and addiction, but of poverty. A 2016 study shows that those in the lowest fifth according to socioeconomic status (SES) account for about 61% of lottery gambling, and on average gamble more days per year (26.1) than any other group.

The majority of the money generated by lottery sales comes from the low income families who can probably least afford it.

Where the Data Comes From

Several layers of data are pieced together for the California lottery to draw their conclusions of how to increase sales. Instant reporting of sales from retailers tells them what stores are running out of what games, and when. We have a predictive model for scratchers in terms of them going out of stock or out of inventory at retailers, he said. And weve got a model to forecast or predict how well we believe a retailer will perform when it comes to selling lottery products.Lottery CIO Chris Riesen explains. Empty retail shelves equate to millions in lost revenues.

This use of big data illustrates why it matters . The ability to analyze huge amounts of data in real time gives the lottery itself a competitive advantage. What is the lottery competing against?

Perhaps legitimate financial products that can truly make a difference to individual wealth, such as savings and retirement accounts are the real competition. The allure of a get rich quick solution provides a sense of instant gratification even though the odds of success are long.

The psychology behind lottery purchases is clear. A survey in 2006 of 1,000 Americans showed that while 55 percent said long term savings was the answer to wealth, most felt their ability to save $200,000 to be very unlikely and even fewer thought that saving one million was possible.

The most staggering statistic perhaps was that 21% felt playing the lottery was the Most practical path to wealth. Those living in poverty often feel a sense of fairness from the lottery: everyone has an equal chance at instant wealth, no matter what their background.

The housing crisis and ups and downs in the stock market reinforce this notion. Even those who save and invest are not immune to failure, and betting on savings seems like just as much a long shot as winning the lottery.

What the Data Costs

Gathering and analyzing the data clearly comes with a financial cost, one the lottery anticipates additional sales will cover. However, there are other costs to the data as well.

Gambling and addiction. As prizes get larger, the temptation to gamble becomes even greater.

Studies show that children of parents who gamble via the lottery are more likely to gamble when they are adults, probably gambling more than their parents did.

Privacy and Security. Any data gathered into any central location for analysis is vulnerable to attack. Everything can be hacked, and while not impossible, it is difficult for data to remain useful when stripped of all identifying information. While the government in general is working to improve cyber security , the Federal Office of Personnel Management data breach in 2015 reveals some significant weaknesses.

Is the lottery a form of predatory gambling, preying on those who the money it raises is supposed to help? Is the benefit significant enough to justify the costs? Many states are betting it is, and California is only one example of this.

Even those retail giants come in second to the biggest harvester of big data though. Number one is the government, and between state and Federal agencies plus local municipalities, there is a lot of data out there about each of us, not to mention what we share voluntarily through fitness apps, location data, and more.

What are they doing with all that data? In California, the Lottery Commission intends to use it to sell more lottery tickets. After all, the lottery helps fund education, right? What could be wrong with raising more funds for schools?

Where the Money Goes

Where does the money from lottery sales really go? Los Angeles Channel Seven reports that 25 to 30 cents of every dollar spent on Powerball tickets in the state goes to public education.

The California Lottery raised more than $1.39 billion for schools in the 2014-2015 fiscal year. Lt. Governor Gavin Newsom, who is critical of the system, says its misleading because people believe more of the money is going to public education than, in fact, is. At the end of the day, its not insignificant, but its hardly significant. I just think it is a crass thing. Despite Newsomes skepticism, and that of other key political figures, the

The California Lottery was created to supplement public schools. Not to totally fund public schools, not to resolve all their problems. It was to supplement their budgets. So we dont do a lot for schools, its a modest contribution, California Lottery spokesperson Russ Lopez replied.

Despite the debate about how significant or insignificant the lotterys contribution to education might be, its hard to dispute the argument that in underfunded schools, every little bit helps.

Where the Money Comes From

Regardless of exactly how much of the funding goes where, there is a larger question: where does it come from? Who is buying these lottery tickets?

The data the Lottery is using to better their sales also tells another tale, not just of gambling and addiction, but of poverty. A 2016 study shows that those in the lowest fifth according to socioeconomic status (SES) account for about 61% of lottery gambling and on average gamble more days per year (26.1) than any other group.

The majority of the money generated by lottery sales comes from the low-income families who can probably least afford it.

Where the Data Comes From

Several layers of data are pieced together for the California lottery to draw their conclusions of how to increase sales. Instant reporting of sales from retailers tells them what stores are running out of what games, and when. We have a predictive model for scratchers in terms of them going out of stock or out of inventory at retailers, he said. And weve got a model to forecast or predict how well we believe a retailer will perform when it comes to selling lottery products.Lottery CIO Chris Riesen explains. Empty retail shelves equate to millions in lost revenues.

This use of big data illustrates why it matters . The ability to analyze huge amounts of data in real time gives the lottery itself a competitive advantage. What is the lottery competing against?

Perhaps legitimate financial products that can truly make a difference to individual wealth, such as savings and retirement accounts are the real competition. The allure of a get rich quick solution provides a sense of instant gratification even though the odds of success are long.

The psychology behind lottery purchases is clear. A survey in 2006 of 1,000 Americans showed that while 55 percent said long-term savings was the answer to wealth, most felt their ability to save $200,000 to be very unlikely and even fewer thought that saving one million was possible.

The most staggering statistic perhaps was that 21% felt playing the lottery was the Most practical path to wealth. Those living in poverty often feel a sense of fairness from the lottery: everyone has an equal chance at instant wealth, no matter what their background.

The housing crisis and ups and downs in the stock market reinforce this notion. Even those who save and invest are not immune to failure, and betting on savings seems like just as much a long shot as winning the lottery.

What the Data Costs

Gathering and analyzing the data clearly comes with a financial cost, one the lottery anticipates additional sales will cover. However, there are other costs to the data as well.

Gambling and addiction. As prizes get larger, the temptation to gamble becomes even greater.

Studies show that children of parents who gamble via the lottery are more likely to gamble when they are adults, probably gambling more than their parents did.

Privacy and Security. Any data gathered into any central location for analysis is vulnerable to attack. Everything can be hacked, and while not impossible, it is difficult for data to remain useful when stripped of all identifying information. While the government in general is working to improve cyber security , the Federal Office of Personnel Management data breach in 2015 reveals some significant weaknesses.

Is the lottery a form of predatory gambling, preying on those who the money it raises is supposed to help? Is the benefit significant enough to justify the costs? Many states are betting it is, and California is only one example of this.