The history of lotteries spans over four millennia. The modern version of them arose out of a need for a form of more state funding that wouldn’t raise taxes. Jackpots have reached record levels in the past few years. And “Americans now spend more on lottery tickets every year than on cigarettes, coffee or smartphones,” writes historian and author Jonathan Cohen. Cohen is author of “For a Dollar and a Dream: State Lotteries in Modern America,” a comprehensive history of America’s lottery obsession. In the book, he points out that lotteries are much less profitable for states than some proponents say, but on the other hand, they are extremely lucrative for private companies that manufacture tickets. Cohen joins WITHpod to discuss the evolution of lotteries, changes he thinks should be made to the way they are run, public misconceptions about the revenue generated by games and why he says state run lotteries shouldn’t exist.
Note: This is a rough transcript — please excuse any typos.
Chris Hayes: Should we abolish the lottery?
Jonathan Cohen: I think it’s time. I don’t think it’s going to happen.
Chris Hayes: You do? You think we should get rid of state lotteries?
Jonathan Cohen: I think we do. I think we should. The gambling will continue. I mean, I make no, you know, jokes about that. You know, people are going to keep betting. But there is no way, you know, without the cooperation of a state government or these companies, that Americans are going to bet $98 billion a year on lottery tickets. And you know, the 5 percent, 1 percent of players are still going to find a way to play. But ultimately, these games are not serving the common good and, in fact, I think are doing more harm than good, overall.
Chris Hayes: Hello and welcome to “Why Is This Happening?” with me, your host, Chris Hayes.
There’s a new Republican Congress you may have heard about, and after, you know, a lot of back and forth, Kevin McCarthy is now leading the House Republican caucus. And one of the first things he did was vote on a rules package, which is a little obscure, but actually ends up pretty important because it’s the kind of guiding governing language for how the House is going to proceed. One of the things they did in there was that they made it harder to raise taxes. They basically put in a bunch of thresholds and procedural mechanisms to make it harder to raise taxes.
This is a sort of favorite standard thing that Republicans do and Republican governors tends to do. They tend to be laser-focused on making it harder to raise taxes and cutting taxes whenever they get the chance. And this is part of 40-plus years of what’s called the tax revolt. It goes back to Reagan, and of course, Grover Norquist in the Americans for Tax Reform, who made all the Republican members sign this pledge. They couldn’t raise taxes, and it’s been incredibly successful. At the state level, particularly, it’s been very successful.
Of course, the problem is that you got to fund the government. So what happens when you make it harder and harder to raise taxes, particularly income taxes which tend to be fairly progressive in their distribution, is you got to find the revenue somewhere. Now, the federal government doesn’t have to find the revenue somewhere, because the federal government can borrow. And so, the federal government is way less constrained by what happens in the tax revolt in the last 20 or 30 or 40 years than the states.
But the states, particularly states that are run by conservative government, but not exclusively, that all states often find themselves in a situation where they have to solve for the following problem. We need more revenue, and people don’t like taxes, and we can’t raise taxes. So what should we do?
And into this picture comes something called the lottery. The lottery is a way that you can raise revenue for your state. You don’t have to tax anyone. And over the last several decades’ generation, really probably around from the same time, we have seen an explosion in lotteries. You will know if you watch local television, how much advertising goes into whatever your local lottery is, in my case, it’s New York Lottery.
You’ll be amazed at the many different forms of gambling now offered to you by the lottery. It’s not just one drawing, but then there’s the Powerball. And then there’s like a million different scratch tickets, and things like that, a million different options. And year over year, lotteries have grown and grown and grown. And they kind of stand outside often policy analysis or some great vague sense of like, oh, well, the lottery money goes to education, so you know, great. That’s not quite really the full story.
In fact, the lottery is a strange thing, too. Because as I’m writing this book about attention, one of the things that struck me is that lottery is one of the lone, like, attention-commanding institutions left along with maybe NFL and, like, a presidential race, where when Powerball gets up to a big enough number, everyone in the country knows this. People talk about it. It can kind of, like, reach out into people’s attention in a way that very few things can anymore.
So I thought it’d be great to kind of, like, peel back the curtain a little bit on the lottery and state lotteries, and how they function and whether they’re a good idea or not. And we have just the guest for that today, Jonathan Cohen, who’s author of For a Dollar and a Dream: State Lotteries in Modern America. He’s a program officer at the American Academy of Arts and Sciences. And Jon, it’s great to have you on the program.
Jonathan Cohen: Thanks for having me.
Chris Hayes: How did you get interested in lotteries?
Jonathan Cohen: I’m a child of the Great Recession. You know, when it came up, that was a sort of formative political moment for me as a 16-year-old, 17-year-old, and so went to graduate school, sort of interested in inequality, American dream opportunity. And then you know, the real answer is that I’m a board gamer by disposition and sort of willing, as a result, to take games and entertainment, I think, more seriously.
Now, there’s an old adage, gamblers don’t read and readers don’t gamble. And so maybe that sort of board game background helped me peel back that curtain a little bit, as you said.
Chris Hayes: What is your gaming interest?
Jonathan Cohen: Like, those three-hour European board games that, you know, destroy friendships or, like, put them to sleep because everyone is, like, barely conscious by the end?
Chris Hayes: Wait. Like what? Like Catan or, like, what are we talking here?
Jonathan Cohen: So Catan is great, but there’s this huge element of luck, right, because of the dice. So imagine a game sort of, I don’t know, three times as complicated that in order to compensate for the removal of luck, it just has to add layers and layers and layers of rules. And I know I’m cognizant of the fact that I read a book about the lottery, and now I’m talking about games that don’t have any luck built into them.
But something of that sort, you know, I’ll just call out Terra Mystica, which is one of my favorites, or Scythe, which have sort of elements of luck and sort of in the way that Chess has luck, where you can’t really predict what the other person is going to do. And you can assume that they’re being rational, but maybe they’re not actually because, you know, no one plays like a computer.
Chris Hayes: Terra Mystica and Scythe, these are board games?
Jonathan Cohen: These are board games, very highly rated on boardgamegeek.com, as I’m sure you know.
Chris Hayes: So you’ve combined your love of games with the interest in inequality, has brought you to the lotteries. Give me the history. What’s the first lottery? When did lottery start?
Jonathan Cohen: Well, I mean, if you open up your Bible, there’s some lots in there, the drawing of lots, you know, to determine land allocation, to determine the recipient of Jesus’ garments following the crucifixion.
Chris Hayes: Yup.
Jonathan Cohen: You know, they hold a little lottery right there.
Chris Hayes: They have like a dice game, basically.
Jonathan Cohen: Yeah. And there’s even a record of a game board recovered from a Roman war camp that has a little inscription on the top, thanking or asking for Jesus’ help to win games of chance.
Chris Hayes: Wow.
Jonathan Cohen: The connection of faith and gambling, we’ll put that aside for a quick second. But in terms of a civic functionality, you know, lotteries are popular in Roman times, sort of as like a party gift, that you’d determine your prizes based on the drawing. But then as a civic function, as far as I can tell, you know, 15th century Belgium is when they’re first used to raise money for government.
Chris Hayes: Wow. What was the lottery in 15th century Belgium?
Jonathan Cohen: So this is true in 15th century Belgium. It’s also true in, you know, 16th, 17th century England, and then also the United States. These games, the lottery games are effectively raffles. It almost looks like a bingo wheel. You write your name on a ticket, you throw it in a jar, and then someone, you know, spins it around, and then pulls it out.
They came up with this idea because there were private companies that were doing this themselves sort of like, oh, by three, I don’t know, vases, get a free ticket for a drawing or something. And then, basically, I think it was the Venetian and the Flemish government decided that they can make money for this themselves and sort of got in on the game. And that’s what sparked, they spread first in Europe, and then ultimately, in the United States.
Chris Hayes: Did those governments outlaw their competitors, or did they get in the game as a competitor of the private raffles and lottery?
Jonathan Cohen: Right. Yeah. In England, it’s definitely the latter, where the government sort of issues a charter effectively for who can hold the lottery. And maybe I’m moving a little bit ahead, but in United States, you know, the states would have to grant you the right to hold the lottery. You know, you’d have to appeal to the Pennsylvania legislature and say, hey, can I have a lottery? I’m trying to build a church or something. Can you, you know, give me the wheel or the licensure to do that?
Chris Hayes: Right. So what I’m hearing for you is, like, you’ll encounter this like a PTA fundraiser or a church fundraiser, right? The 50/50 raffle, like, you buy raffle tickets, the money goes into a pot, they draw out a name, the name gets 50 percent of the revenue generated. The other 50 percent goes to the entity you’re raising money for. That basic structure sounds, like, really old. Like, that basic structure is really old, pretty popular, and has been around for centuries as a way of raising money.
Jonathan Cohen: Right. And really simple, if you think about it technologically versus something like —
Chris Hayes: Yeah, it’s very simple.
Jonathan Cohen: — Powerball versus something like a scratch ticket, where the printing and the numbers and the management are really, really complicated and require a lot of security and sort of backroom manipulation.
Chris Hayes: Is it good at raising revenue in, like, 15th century Belgium?
Jonathan Cohen: As anything? Yeah. I mean, I’ll say they’re good enough that they keep using them. And especially in the colonies, but then, you know, even in England as well, it’s just hard to accumulate cash. It’s hard to just, like, get cash on hand for things like construction projects. Or if you’re, you know, a rich guy, this is more so true in the United States, but if you’re like a rich guy who passes away and you’re left with a bunch of farmers, and no one has enough cash to buy your land, maybe you hold a lottery instead, so that somebody wins and sort of raises enough money for the family that you’re getting your money’s worth from your estate.
Chris Hayes: Wow. People would do that?
Jonathan Cohen: Yes. And Thomas Jefferson, like, gives it a big thumbs-up in the Notes on the State of Virginia. He’s, like, oh, this is a tax on the will (ph). I think this is a great idea. It doesn’t seem that much more risky to me than shipping or farming or any other sort of commercial venture.
Chris Hayes: Wait. The idea is like you’re a tenant farmer in someone’s land. The actual owner dies. No one can purchase the property that’s now sort of sitting there. And so, all the tenant farmers together, get together and have a raffle?
Jonathan Cohen: Or maybe the widow or something holds a raffle effectively, say, to purchase the land, but nobody has —
Chris Hayes: Oh.
Jonathan Cohen: — you know, 15,000 pounds, I’m just making up a number, to —
Chris Hayes: Right.
Jonathan Cohen: — afford the estate. But everyone has 2 pounds and 50 cents to afford a raffle ticket, and maybe one of them will become the new landlord.
Chris Hayes: Wow. And then you, as the winner, you get paid. Like, you get the money.
Jonathan Cohen: Exactly.
Chris Hayes: The money gets raised. There’s one lucky winner. I mean, that’s the brilliance of the lottery, right? A bunch of small dollar decisions spread over a bunch of people. The reason farm subsidies work, right? It’s like, you know, if you’re taking 80 cents from every urban dweller, and then redistributing in huge amounts to big agri interests, like you can kind of get away with it. And the lottery is doing the sort of same thing in that sense.
Jonathan Cohen: Right. In this case, it’s by necessity, again, because the banking center, you know, London is six weeks away by boat. So you can’t, like, take out a home loan, and especially if you want to fund a construction project, as I said, there’s no way to just like get all that cash on hand, other than taking a dollar from every single person in, you know, city.
Chris Hayes: I mean, there’s a deeper thing here, I guess we’ll just go there, and we’ll see. There’s a deeper thing here, like, why do people like to gamble?
Jonathan Cohen: Yeah. Well, I mean, I have a great quote from a Las Vegas pit boss dealer, a pit boss in my book, about this. But basically, his theory is like people just want to know if they’re a winner or loser. And you don’t play to win, you play for, like, that moment when the card is going to be flipped up, or that ticket is going to be drawn that’s going to —
Chris Hayes: Absolutely.
Jonathan Cohen: — reveal to you and say something about you, Chris Hayes, as a person, like, you are a winner, or you’re just like a guy.
Chris Hayes: Yeah. There’s an amazing book that I’ve actually been sort of obsessed with and been using for my own book, it’s called Addiction by Design. Do you know this book by Natasha Schull?
Jonathan Cohen: Yeah, about the slot machines.
Chris Hayes: Yeah, it’s about slot machines. And she had these great quotes from people being, like, I know, I’m losing money. In the aggregate, I’m not an idiot. Like, I understand the math. I understand the casino wins. I do it because the experience of the flow state is the thing that I like. It’s not about winning, it’s about being in the zone of the machine. That’s why I do it.
Jonathan Cohen: And you can get into this epithet that lotteries are a stupid tax or a tax on people who are bad at math. And that’s exactly why I hate those kind of ideas, that it’s so clear that people who say those things have never played the lottery or are not regular lottery players and cannot sort of visualize what the value people get from playing.
Chris Hayes: Right. I mean, the Econ 101 idea here is that you’re purchasing some utility, right? You’re purchasing an experience. To me, what I find interesting about it, I’ve never been a gambler, it’s, like, just not a vice that has its hooks in me at all. What I do understand, subjectively, about what’s attractive about it is, like, I’m very much like a schemer and plotter. Like, I’m constantly thinking about, like, future projects. And if I’m not, it’s like a shark, you got to keep moving forward. So for me, it’s like, oh, I got this project, I got this coming up, I got this coming up.
I understand the delight of, like, I’ve got this thing that might be out there. My life is going to change with this lottery ticket, or I put this bet on the Bulls game. Like, that experience of being in the interregnum of the present and the future, with this kind of hopeful posture, is a pleasurable one that I think is part of what people are purchasing.
Jonathan Cohen: Exactly. And I think that just Econ 101 story that you’re normally told about lotteries is, oh, your expected dollar result is negative. You’re going to lose —
Chris Hayes: Right.
Jonathan Cohen: — more than you win. And therefore, it’s irrational to play.
Chris Hayes: Right. Or that the utility function makes up the difference in the price.
Jonathan Cohen: Exactly.
Chris Hayes: Right. Because the expected value, as a matter of math, for the lottery to work, has to be less than what you pay for it, right? But what you’re purchasing is the experience of a little sunshine in your pocket.
Jonathan Cohen: Exactly. You know, the expected value of a movie ticket is also negative, but you’re getting the value —
Chris Hayes: Right.
Jonathan Cohen: — of seeing the movie. But people don’t see it as a form of entertainment. They really, to your point, just see it as a form of math and a matter of, you know, statistical probability.
Chris Hayes: But like so many things that also get grouped under the category of vice, which is a sort of fascinating category to think about anyway, what is in vice, right, like gambling, sex, and booze. It’s also one of those things where, like, it’s very clear, it gets out of control real easily. And I think this is true and I know there’s texts from all over the world, you know, going back a long time, where various people from, you know, the Prophet Muhammad to Confucius, to the Old Testament, have things to say about gambling because it’s been with us for a long time, and very clearly, can get out of control real quickly.
Jonathan Cohen: Yeah. I’ll just say very quickly, there is actually no prohibition on gambling in the Old Testament. That’s sort of a common misconception. But people assume there is because evangelical Protestants are sort of the big vocal opponents.
Chris Hayes: Right. But they do talk about it, right?
Jonathan Cohen: Yeah.
Chris Hayes: No, I don’t mean that they’re prohibited —
Jonathan Cohen: Yeah.
Chris Hayes: — but it is discussed as a thing that is in the world —
Jonathan Cohen: Right.
Chris Hayes: — to sort of interact with.
Jonathan Cohen: And in 1612, King James, the first sort of puts a light ban on lotteries, a pause on lotteries in England, because too many poor people are playing and because he thinks they’re playing too much. So you know, a precedent for these, sort of, moralistic maybe, but, you know, depending on what you call it, paternalistic sort of bans on gambling among the poor specifically, that goes back, you know, longer than we’ve ever had data on who exactly is playing the lottery.
Chris Hayes: So these are popular in the colonies, right?
Jonathan Cohen: Right.
Chris Hayes: Do we have them in the early parts? Like, do they keep playing that kind of role, where the states are using them to raise money?
Jonathan Cohen: Right. I mean, some universities, you might have heard of Harvard, Princeton, Yale, you know, funded the construction of their dormitories through lotteries. And through the —
Chris Hayes: Wow.
Jonathan Cohen: — let’s say, 1820s, 1830s, they’re pretty prevalent. And just to your opening monologue, sort of in a society politically defined by an aversion to taxation, you can imagine why a lottery would be popular for these, you know, now state governments, formerly colonial governments. But then the second great awakening comes along, this sort of religious revival of evangelicalism in the 1830s, 1840s, and they really sort of fall out of favor.
It’s weird, some of them come back after the Civil War in some states. I’m moving a little quickly. But there’s one left in the 1890s in Louisiana that’s sort of super corrupt and selling lottery tickets all over the country. And then it finally takes Congress to intervene, and they sort of cracked down on the Louisiana State Lottery Company, also known as the Golden Octopus.
Chris Hayes: Wait. Tell me more of the Golden Octopus.
Jonathan Cohen: So there’s no lotteries left, right, in the early 1890s.
Chris Hayes: And this is because of basically successful, like, virtue crusaders —
Jonathan Cohen: Yeah.
Chris Hayes: — born on the wings of evangelical revival?
Jonathan Cohen: Warming up for their prohibition, for their temperance campaigns, but they started gambling.
Chris Hayes: Interesting.
Jonathan Cohen: Yeah.
Chris Hayes: Interesting.
Jonathan Cohen: And so the last one left is this Louisiana State Lottery Company, again, also known as the Golden Octopus, which sells tickets all over the country. You know, you live in New York, and every state between Louisiana and New York has banned lottery tickets, and yet somehow the Louisiana lottery is selling tickets and advertising in New York.
Chris Hayes: How are they selling the tickets?
Jonathan Cohen: Through the mail, through agents —
Chris Hayes: Wow.
Jonathan Cohen: — you know, like retailers. I can’t even describe how corrupt the operation of this lottery is. They make like millions in sales a year. They nominally benefit this like Children’s Hospital in New Orleans. But it’s like $5,000 on $28 million in sales. And then they brought like old school machine politics style, like just bribe their way through every Louisiana legislature to preserve their charters, to sort of stay legal.
Chris Hayes: They’re private. It’s not a state thing.
Jonathan Cohen: Yeah. Basically, if we privatized a lottery today, it would be that equivalent —
Chris Hayes: Right.
Jonathan Cohen: — you know, with this promise that a certain percentage goes to this whatever hospital.
Chris Hayes: But just to be clear, Louisiana government is not getting any state revenue from this?
Jonathan Cohen: Correct.
Chris Hayes: There’s just a totally private thing that’s kind of public chartered to run this on behalf of a children’s hospital, and they’re selling $28 million of tickets and giving the children’s hospital like 5,000 bucks?
Jonathan Cohen: Or maybe it’s $50,000. But, yeah, it’s like some penance compared to the overall amount. I mean, it’s 1890s, right? Who knows that these prizes are ever given out. Like, you know, there’s no way to know if you live in Chicago, you’re here reading the paper, someone in Boston won the lottery.
Chris Hayes: Of course.
Jonathan Cohen: That could be made up. Like, maybe these guys are just pocketing the money.
Chris Hayes: Right. Oh, so it’s just not even clear if there’s even a payout?
Jonathan Cohen: Yeah. I mean, this is also true of what’s called the Dublin’s sweepstakes, which is sort of an Irish-based lottery that happens, except my mom claims that, like, the superintendent of her building in Queens won the Dublin sweepstakes and that’s what he bought the apartment. That’s the only evidence I have that anyone ever won the Irish sweepstakes and that any prize was ever actually given out.
Chris Hayes: Wait. OK. So, you know, let’s finish —
Jonathan Cohen: Yeah.
Chris Hayes: — what we got in Dublin. So what brings its downfall? Like, how does it get so out of control?
Jonathan Cohen: So again, it’s bribing its way through these legislatures to preserve its charter, keep its monopoly. And then, finally, Congress has to step in, because Louisiana State Legislature is just, like, literally bought and sold by this company.
Chris Hayes: And because it has become other people’s problems, presumably, right?
Jonathan Cohen: Exactly.
Chris Hayes: Like, if all these people are buying tickets in all these different states, and no one is ever winning, you start to hear about it.
Jonathan Cohen: And the states have banned lotteries. So they’re like, oh, surely, people are safe.
Chris Hayes: Right.
Jonathan Cohen: You know, they can’t buy lottery tickets anymore. And then here comes the Golden Octopus named sort of for its tentacular reach, you know, into the furthest reaches of the country. So Congress basically cracks down on interstate lottery advertising. They cracked down interstate transportation of gambling paraphernalia. Like a lottery wheel or something, you can’t move across state lines.
And this is important for two reasons. First, these regulations go to the Supreme Court and are upheld in Champion v. Ames, which, you know, law students out there will know is sort of the Supreme Court decision that holds up Congress’ ability to regulate interstate commerce. That’s one big one. And then, second, you know, fast-forward 60, 70 years when these first state-run lotteries start up, these laws are still on the books and are huge problems that really slow down the development of the games because, you know, the New York Times can’t advertise the New York Lottery and then sell a paper in Connecticut with the New York State Lottery —
Chris Hayes: Wow.
Jonathan Cohen: — advertising in it, because there’s this interstate law targeting Louisiana from the 1890s.
Chris Hayes: That’s wild. So it does stamp it out, though.
Jonathan Cohen: Yes. Well, they moved to Honduras and Havana. It’s just not as big.
Chris Hayes: Really?
Jonathan Cohen: Yeah.
Chris Hayes: They slayed the Golden Octopus —
Jonathan Cohen: Yeah.
Chris Hayes: — or they get the old Golden Octopus to go offshore.
Jonathan Cohen: Right. Then there’s really nothing they can do there. But there’s no way they’re going to have as big of a reach, you know, without the protection of an American state legislature.
Chris Hayes: So, wait, what was the Dublin one, though? Is that more recent? That’s —
Jonathan Cohen: So basically, what we get after that, and this is a wave of illegal gambling, and then there’s sort of two sides of this story. One, they are black numbers games in urban northeast and Rust Belt cities. And the other one more popular among white working-class people who also played the numbers a little bit, is a sweepstakes based in Ireland. I think also nominally benefiting a hospital of some kind. But they sell tickets all over the country. And again, I guess my mom knew someone who won it once.
Chris Hayes: Wait. In the U.S.?
Jonathan Cohen: In the U.S. Yeah.
Chris Hayes: So, wait, so basically, the whole thing, that kind of lottery world and that sort of gambling world goes underground post 1890?
Jonathan Cohen: Right.
Chris Hayes: And it’s bifurcated by race. People know about, I think, probably the numbers. It’s, you know, in black neighborhoods in Harlem. And Malcolm X, in his autobiography, talks a lot —
Jonathan Cohen: Yeah.
Chris Hayes: — about the numbers running because he was sort of involved in that. And that’s just basically a lottery, right? I mean, there’s like numbers and you choose them, and then if you hit them, you get paid out.
Jonathan Cohen: Yeah. It’s a daily lottery, right, versus Louisiana, which is like monthly or —
Chris Hayes: Right.
Jonathan Cohen: — whatever. And it’s like a three or four-digit game rather than a longer thing. And there’s this ingenious mechanism where, basically, if you know where to look in the newspaper every day, you can see what the number of drawing was. And this is very important, you can play for as little as like a couple pennies. You can, like, bet a nickel or something. You don’t need to, you know, shell out a full dollar, $2, whatever, for full ticket. You can, you know, really, really play. Basically, it’s much more accessible to the poor in a real way.
Chris Hayes: Wow. And are these interconnected from city to city, or their numbers outfit that run in each city?
Jonathan Cohen: So the number itself is drawn, right. It might be like the last three digits of the New York Stock Exchange for the day, and it might be that the numbers in Detroit and Cleveland and Boston all use that same number.
Chris Hayes: That would be like a kind of thing. That would be like an example of how the numbers would be drawn?
Jonathan Cohen: Exactly. Or there was some crazy formula —
Chris Hayes: Wow.
Jonathan Cohen: — where it’s like the third digit from this horse race track handle, and then the fourth digit from that horse race. But if you’re in the know, you’re in the know.
Chris Hayes: Right. And what’s cool about that, or smart and ingenious, is that it is transparent, right?
Jonathan Cohen: Yup.
Chris Hayes: It’s a publicly accessible, known in advance number, that will appear tomorrow, that will also be random.
Jonathan Cohen: Right. Not that it didn’t stop people from like trying to, like, camp out at the New York Stock Exchange and, like, telegraph the number to Chicago before someone could call and, like, get the numbers.
Chris Hayes: Of course.
Jonathan Cohen: You know, there’s all these like wacky stories from the 1920s of people trying to do that.
Chris Hayes: It’s like the flash boys, right? It’s like —
Jonathan Cohen: Yeah.
Chris Hayes: — the nanosecond micro-trading. Like, they’re trying to, like, basically get the info. They’re trying to arbitrage on the time it takes for the info to travel.
Jonathan Cohen: Right. But the year is 1912. And yeah —
Chris Hayes: Right. So tell me about the Dublin one. So I’m familiar with the numbers.
Jonathan Cohen: Yeah.
Chris Hayes: But Dublin one is one that white working-class folks or poor white people in America are playing. It’s their version of the numbers, but it’s run out of Dublin?
Jonathan Cohen: Yeah. And I think as far as I can tell, it’s still sort of a raffle structure. Again, it’s sort of the technology to do something like a Powerball, where you actually get numbers, and you can play your own numbers. That’s really hard and really sort of requires a lot of technological proficiency. As far as I can tell you, like write your name on a little slip or something, and they draw you, and then you’ll get a letter maybe or maybe a fat envelope in a couple of weeks or months or more likely never, that says, hey, by the way, you won the lottery. Here’s $10,000 or something.
So I don’t want to say that the player base is that big. I mean, I think in places like New York, it was very popular. But what’s important here, as with the numbers, is that the lottery doesn’t, like, fade from public consciousness. And then as state legislators are starting to warm up to the idea of a legal state lottery, oh, you know, we all know about the lottery. Everyone plays the Dublin sweepstakes or plays the numbers, and that’s what sort of —
Chris Hayes: Right.
Jonathan Cohen: — keeps it top of mind. And it’s not like, oh, let’s legalize heroin. People are, like, what? We’ve never had legal heroin, but we’ve always —
Chris Hayes: Right.
Jonathan Cohen: — had lotteries sort of at arm’s length throughout American history.
Chris Hayes: So what brings about the kind of modern era of the lottery?
Jonathan Cohen: Yeah. So it starts in New Hampshire, you know, maybe not surprisingly, which in the 1960s was one of only three states without a sales or an income tax. And I argue, you know, many possible interpretations, but in the immediate post World War II period, no, 1950s, there’s sort of this golden moment, as you well know, of sort of economic exceptionalism. We can have larger state governments, more services, without more taxes to pay for them.
And then lo and behold, Vietnam, inflation, stagflation, that comes sort of crashing to a halt and state government sort of need to buttress their budgets, and these voters don’t want to pay more for the services that they already enjoy. So that’s sort of one big factor. That’s a big one. I think that sort of explains why ‘60s and ‘70s is when that first wave comes in.
Chris Hayes: And is there a big fight over it?
Jonathan Cohen: Yeah. The federal government hates it. They, like, hate the New Hampshire Lottery. Remember that old 1890s law against gambling paraphernalia, like the New Hampshire lottery pays to have their wheels built in, like, I don’t remember where, let’s say Chicago, and the federal government won’t let them transport into New Hampshire —
Chris Hayes: Wow.
Jonathan Cohen: — across state lines. Because it’s sort of like marijuana legalization under the Trump administration, where states might decide that it’s legal. But the federal government doesn’t have to and doesn’t have to take a supportive position if they don’t want to. And the games are also crazy, but we can get into that. Their design is just absolutely insane.
Chris Hayes: Well, tell me.
Jonathan Cohen: So there’s, still on the books, a 10 percent excise tax on all gambling not associated with horse racing.
Chris Hayes: This is in New Hampshire or federal?
Jonathan Cohen: A federal.
Chris Hayes: OK.
Jonathan Cohen: There’s a federal carve-out for horse racing.
Chris Hayes: OK. So the federal regime that they’re under is, but for horse racing, any gambling is subject to a 10 percent federal excise tax.
Jonathan Cohen: Yeah. Which at that time really just applies to bingo, because bingo games are sort of being legalized, you know, your local church bingo game, which was happening underground anyway, but those are being legalized in the ‘50s and ‘60s.
And so, as a result, New Hampshire is like, oh, we don’t want to pay that 10 percent tax. So they have this crazy raffles-like scheme where you draw a ticket, but it’s not actually, you know, your name that’s drawn of who the winner is. It’s like you draw the number of a horse, and then do a separate drawing for the number of a horse race. So it’s technically affiliated with like, oh, if we look in the digest —
Chris Hayes: Right.
Jonathan Cohen: — the horse race digest from 1942, that in the seventh race, it was the sixth horse that won. And oh, Bobby Smith has the seventh horse from the sixth race. She wins $600,000 in the lottery.
Chris Hayes: Wow. Their random generator was piggybacking off of random horse stuff because that would get them out of the excise tax?
Jonathan Cohen: Right. With an occasional actual live horse race just to, sort of, build up excitement. As you can imagine, you know, horse racing is known as the sport of kings, right? So they’re trying to build legitimacy, like cultural legitimacy for the game. And then the other big one, just to tie back to the numbers and organized crimes reputation for sort of getting involved in gambling economy, is they don’t want to be seen as corrupt, and they want to remove any possibility that these games are rigged.
And you know, the first director of the New Hampshire Lottery is a former FBI agent, not someone who, like, knows about games, because of the, you know, Kefauver hearings and its fears that organized crime is going to infiltrate state lotteries in the way that it did in Nevada casinos.
Chris Hayes: Right. And Kefauver hearings are these big hearings by a senator from Tennessee, fascinating liberal senator who sort of went after the mob.
Jonathan Cohen: Yeah.
Chris Hayes: Also the mob’s collaboration with legitimate business —
Jonathan Cohen: Right.
Chris Hayes: — and these big high-profile hearings.
Jonathan Cohen: And they had more viewers in 1951 than the World Series. You know, more people watched the Kefauver hearings than the World Series.
Chris Hayes: Wow.
Jonathan Cohen: You know, Estes Kefauver has this sort of formula, where his idea that he imparts is gambling isn’t just something that the mob does, gambling is what makes the money that lets the mob do all this other stuff. So if you want to cut out prostitution or drugs or whatever, you have to go after gambling, is his idea, not just sort of treat gambling as one of these other factors.
Chris Hayes: More of our conversation after this quick break.
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Chris Hayes: Was the gambling run by organized crime whether, you know, the mafia or, you know, black organized crime in urban environments, were they rigged, or were they running legitimate lottery games?
Jonathan Cohen: It depends who you ask. In some cases, what all organized crime is doing is backing local operators. So like, you know, Chris, you run a little numbers games for your friends, you know, maybe a couple hundred people in your neighborhood. And if too many people bet on the number 666 one day, for example, you would offload some of that risk onto your local monitor (ph), because you would be wiped out financially if that number came through.
But then, in some places, you know, in Boston, it’s like Whitey Bulger, though, he actually runs the game like Tony Soprano style. So it depends. It’s really a city-by-city case, as to sort of how involved and integrated into that gambling economy they are on a day-to-day basis.
Chris Hayes: But the point is, like, there’s an association in people’s minds in the ‘50s and ‘60s and going into the ‘70s when we get the lottery birth of like gambling with illicit activity.
Jonathan Cohen: Exactly.
Chris Hayes: I mean, like, both (ph), a memory of it is, like, legitimate and sort of in a gray area, but also illicit, right? It’s sort of both.
Jonathan Cohen: Yeah. And again, it’s very local. And then that’s where the logic comes in of, oh, all this stuff is happening anyway, we might as well legalize it, which is another sort of factor inspiring the rise of state-run games.
Chris Hayes: Right. Which is very similar to the argument that people, you know, pushing to legalize illegal drugs, particular marijuana, made for years, right? Like, people are going to use marijuana on the scale of things that are harmful. It’s, like, not super harmful. There are things that are more harmful, a lot of people argue, and I think somewhat persuasively alcohol is. And you know, prohibition only pushes it underground. Market demand is going to be met by illicit forces.
Now, the next step, though, would be like, OK, New York State is going to be the sole monopoly seller of weed, right?
Jonathan Cohen: Right.
Chris Hayes: Which is what ends up happening in the lottery situation, right? So —
Jonathan Cohen: Right.
Chris Hayes: — New Hampshire launches the lottery. And is it a big success that generates a lot of revenue and states start clamoring or —
Jonathan Cohen: The states do clamor, but not because it’s a big success. So New York gets in the game, sort of modeled off of New Hampshire’s. They also have this weird sort of horse race drawing formula. And then it’s New Jersey, I mean, of course, it’s New Jersey, that really sort of figures it out. And they add weekly drawings, not just like a drawing every four months or whenever, you know, as people bet a certain amount. They have this weekly drawing, plus an occasional horse race drawing. That’s how they get around this excise tax until it gets repealed.
And then, ultimately, 1974, Massachusetts, is when we get scratch tickets. And then the following year is when we get legal daily numbers games, and that’s when we’re off and running. 1978, we get lotto, which is the precursor to Powerball and Mega Millions. Now, we’re sort of really cooking with gas and playing sort of real games that people will actually enjoy.
Chris Hayes: My cause-and-effect story in the opening, which is about the explosion of this, is about sort of revenue and the tax revolt, which I think generally checks out. But this is all happening kind of before that. So what happens in those years that get us the legalization terrain that then can explode once the sort of tax revolt happens?
Jonathan Cohen: Yeah. So that first wave is happening a lot. Again, it’s happening in the northeast and Rust Belt because these are the states where the numbers games are. So this is where people are, quote/unquote, “already gambling,” and —
Chris Hayes: Right. OK.
Jonathan Cohen: — so to say, quote/unquote, “might as well legalize.” And then there’s the phenomenon, which you’ve also seen nowadays with marijuana, of, oh, Connecticut or Massachusetts already has a lottery, so people in Connecticut are already gambling.
Chris Hayes: Right. Of course.
Jonathan Cohen: There’s betting in Massachusetts. We might as well legalize it ourselves.
Chris Hayes: Right.
Jonathan Cohen: If you look at the map, it’s really like all of the northeast and Rust Belt plus Illinois, and then that’s it. And then they stopped then in their tracks in 1977, right before the tax revolt that you mentioned.
Chris Hayes: But the federal government repeals the excise tax.
Jonathan Cohen: Yeah. So 1975, 1976 is when they repealed the excise tax. They repealed this advertising restriction. They repealed the advertising over state lines. They basically get out of the way, and that’s basically been their posture towards lottery since then.
Chris Hayes: Are the state lotteries sold as specifically going to be about education funding in the beginning?
Jonathan Cohen: No. It’s even worse than that. They’re sold as, like, we are going to solve every tax problem this state has ever had and will ever have for history. They are like a panacea, silver bullet for everything, again, because the ironic consequence of these Kefauver hearings and all these other hearings is, oh, look at how profitable illegal gambling is. Surely, if we legalize it for ourselves, we’ll never have to pay taxes again, or there’s a quote from a New Jersey congressman, we can increase every service in this state fourfold is what he says. It does not turn out that way. But they don’t even need to bother to designate it specifically for education because it’s going to solve education and all their other problems, too.
Chris Hayes: And then what happens in terms of the actual revenue versus revenue projections?
Jonathan Cohen: Yeah. So it just goes into the general fund, and it doesn’t make a difference. But it does sort of set the stage, and we can hold on this for a second, but for this next wave that’s going to start in western states in the ‘80s, that are going to not tie the lottery to the whole general fund and to the whole state. But they’re going to tie it, exactly as you said, to their one specific state program, you know, education, public parks, police services. Because the panacea for the whole state doesn’t work, maybe a panacea for one program will work instead.
Chris Hayes: And it doesn’t work, why? Because there’s just not enough revenue?
Jonathan Cohen: Yeah. Well, ironically, the New Jersey Lottery in its first year in 1969, sort of based on the projections that were hoped for, they actually are meeting those predictions today, if you translate, you know, 1969 projections of $500 million. You know, they’re getting pretty close to that in terms of billions of dollars today.
But the number of games and the variety of games that they offered in 1969 was never ever going to get to what you have today, which is, you know, as you said, every type of scratch ticket, every type of lotto game, every type of daily drawing game. So based on the style of games, it was absolutely insane solid (ph) projection. Today, now that we have all this amazing technology and printing and companies that sort of forced lottery tickets on people’s throat, it’s a lot more accurate.
Chris Hayes: So then there’s another wave in the ‘80s.
Jonathan Cohen: Yeah.
Chris Hayes: Why did we get this other wave? And how long does it take for every state to get one?
Jonathan Cohen: Right. So this other wave is driven by this company, Scientific Games Incorporated, which basically astroturfs its way to lotteries. Then they advertise on behalf of the lottery, and it works. And then they also, you know, you’ll be shocked to hear, write the law in such a way that they’re all but guaranteed to receive the lottery contract to print the tickets once the lottery is in effect.
Chris Hayes: So is there one lottery company operating with all these contracts?
Jonathan Cohen: There are a couple, but there’s only one that has the hutzpah to, like, really write the law in such a way that’s so beneficial —
Chris Hayes: Wow.
Jonathan Cohen: — and is willing to invest and sort of, I guess, risk the money to pay for these initiatives upfront, without a technical guarantee that they’re going to receive the contract.
Chris Hayes: But they win?
Jonathan Cohen: But they win. Of course, they win the contracts. Yeah. And that’s just to your point about sort of this inevitability of gambling, oh, gambling is going to happen anyway. That’s when once all these states legalized and four states, it’s California, Oregon, Missouri, and West Virginia passed lotteries on election day 1984, that’s when basically states are like, all right, this is going to come for us anyway. You know, we might as well get in early. The exception of that is Southern states, which we can put for the final wave. But that’s when the rest of the Midwest and West just gets onboard.
Chris Hayes: And the final wave in Southern states where essentially the religious evangelical opposition to gambling was strongest?
Jonathan Cohen: Yup. And Alabama is still holding out. You know, Mississippi fell in 2018. There are a couple others that sort of hold this still, you know, Utah, you’ll be shocked to hear, but yeah. The panacea has a final wave or final iteration where in the Western states, you have a panacea not for the whole state budget, but for one line item in the state budget. And then I don’t know if you’re familiar with the HOPE Scholarship in Georgia, but the premise that any state student with a high GPA can go to any in-state university for free. That sort of brings the panacea down to the family level and say, oh, the lottery will pay for your kid to go to school. You just have to pass it first.
Chris Hayes: The HOPE Scholarship, which was the sort of signature policy achievement of the governor named Zell Miller, who would then be a Democratic senator, and then very famously, switched over to the Republicans. He once challenged Chris Matthews to a duel live on air after he gave a nominating speech for George W. Bush in 2004 at the RNC.
Jonathan Cohen: Only person to give the keynote address at both the DNC and the RNC.
Chris Hayes: Right. But that HOPE Scholarship was huge and hugely popular. It basically said if your kid gets a B, or as they say, in the south makes a B, then they get to go to a state school for free.
Jonathan Cohen: Yup.
Chris Hayes: Right? Tuition free.
Jonathan Cohen: Right. And it’s a merit scholarship, right, which as folks may have been to intuit, inherently, it privileges richer, whiter —
Chris Hayes: Yup.
Jonathan Cohen: — students. And you’ll be shocked to hear it is not richer, whiter families that are buying the lottery tickets —
Chris Hayes: Right.
Jonathan Cohen: — that are funding the HOPE Scholarship in the first place.
Chris Hayes: Right. Yes, it’s a subterranean, both sort of class and racial transfer that’s happening from poor black folks to more affluent white folks.
Jonathan Cohen: Yeah. And you’ll be shocked to hear that other states love what’s happening in Georgia, in the south specifically. And you know, other states, including Louisiana, have either lottery-funded scholarships or sort of just merit scholarships in general, because, you know, the HOPE Scholarship is so successful and wins the Miller two terms as governor.
Chris Hayes: Well, let’s segue into the distributional effects here, right. I mean, there’s different distributional effects of different kinds of revenue; the income tax, which some states have a flat income tax, some states have a graduated income taxes. Then there’s consumption taxes, sales taxes, which tend to be relatively regressive. Poor people spend much larger percentage of their income on consumption than do —
Jonathan Cohen: Right.
Chris Hayes: — the wealthy people. There are property taxes, which ends up happening often in the absence of state funding, right. So when you’re funding education, the less state funding you’re getting, the more you’re going to have from property taxes. Property taxes in a place like Texas, for instance, which is a very low tax state at the state level has very high property taxes than a lot of places, to make up for that revenue. So there’s different distributional, you know, effects of different revenue raising methods. What’s the general distributional story of the lottery?
Jonathan Cohen: Well, the real story is that it’s small. We shouldn’t even be putting lotteries in the same sentence as like a property tax or income tax because we’re talking about like 2.5 percent of state revenue total —
Chris Hayes: Right.
Jonathan Cohen: — in such a way that, especially if it’s designated for a specific program, like in Georgia. But we’re really, like, talking about orders of magnitude differences. And in some states, you know, Illinois, your beloved Illinois, they love to say, oh, it’s the fourth-largest source of state revenue. Yeah. But the first one is like sales tax, and then the second one is —
Chris Hayes: Right.
Jonathan Cohen: There’s a pretty big drop-off between number three and number four in basically every state.
Chris Hayes: We’ll be right back after we take this quick break.
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Chris Hayes: So how big are lotteries? And how much should we do they matter, and how much should we care? Right? Because at some level, it’s like they’re a little bit of a bait and switch that is going to solve all these revenue problems and we won’t have to raise taxes. But then the fact that they don’t deliver on that promise means that, like, they’re not actually that big. Like, are they really hurting anyone?
Jonathan Cohen: So it’s a really important distinction on the consumer side, and then on the state side, where the impact on the government is very, very small because as a share of the money that states make, it’s a very small percentage. But as a share of the discretionary spending that a lot of people have —
Chris Hayes: Right. Of course.
Jonathan Cohen: — right, you know, it counts suddenly for a lot of money for a lot of people.
Chris Hayes: Well, that gets us to the distributorship story here.
Jonathan Cohen: Yeah.
Chris Hayes: Who is it coming from and can they afford it, I guess, is the question.
Jonathan Cohen: Right. So you know, one in eight Americans buys a lottery ticket once a week.
Chris Hayes: That’s high.
Jonathan Cohen: Yeah, it’s a lot. 50 percent once a year.
Chris Hayes: Right.
Jonathan Cohen: As long as they share their winnings with me, that’s fine.
Chris Hayes: I was talking to my mom on the phone before I came to this interview. I was telling her who I was having on the podcast. I mean, I know this sounds different and I’m in a very, very lucky position where I’m not, you know, stressed about money all the time. A billion dollars sounds like a nightmare. Like —
Jonathan Cohen: Yeah.
Chris Hayes: But, I mean, obviously, it sounds like if you’re stressed about money, it’s like all of that stress is going to go away, and you’re worried about your mom who needs 24-hour care that Medicaid is not paying for, and you got debt. I mean, I just like 100 percent understand it. But like in real terms, that seems like a nightmare.
Jonathan Cohen: Well, I have good news. I have two pieces of good news. First, you’re not going to win.
Chris Hayes: Right. That’s —
Jonathan Cohen: And second, that’s only $700 million after taxes. So that’s like a —
Chris Hayes: Right. And a good point. Good point.
Jonathan Cohen: So just to answer your distributional question. So the top —
Chris Hayes: Yup.
Jonathan Cohen: — you know, 20 to 30 percent of lottery players accounted for as much as 70 to 80 percent of lottery sales.
Chris Hayes: Wow.
Jonathan Cohen: And that group, that 20 to 30 percent is disproportionately non-white, less educated, and lower income, and male actually is sort of another inequality. And I think very importantly, it’s actually not the sort of very, very bottom, you know, the lowest quintile of wealth, it’s that second quintile of wealth. You know, folks at the very bottom just don’t have the discretionary spending —
Chris Hayes: Right.
Jonathan Cohen: — to buy enough tickets. It’s that next group that has the discretionary spending but perceives a lack of opportunity in the economy. And they reason —
Chris Hayes: Right.
Jonathan Cohen: — falsely, but —
Chris Hayes: Yeah.
Jonathan Cohen: — the reason, they have just as good odds of winning the Mega Millions, odds of one in 302 million, as they do of, you know, getting out, getting up, having a new life —
Chris Hayes: Right.
Jonathan Cohen: — do their job.
Chris Hayes: Yeah. I mean, we should also say that like that 80/20 power law distribution, which you see a lot. Like, you know, I think alcohol sales are like that. I think casinos run on those, right, like a relatively small percentage of people accounting for —
Jonathan Cohen: Yeah.
Chris Hayes: — the vast majority of the revenue. That is not distinct to lotteries. I mean, casinos, as far as I know, and I think alcohol sales also, operate roughly along those lines.
Jonathan Cohen: Right. But the difference being that Smirnoff is not a state-run agency.
Chris Hayes: Right.
Jonathan Cohen: Casinos are not done at the behest of the state government.
Chris Hayes: Right. How much has this grown through the years?
Jonathan Cohen: Yeah. So just to go back to 1964 in New Hampshire, we had one state and $5.7 million in sales. As of last year, we had 45 states and $98 billion in sales, which as recently as, let’s say, 10 years ago, 2014, Americans spend more money on lottery tickets than on books, sports tickets, video games, music and movie tickets combined.
Chris Hayes: Wow.
Jonathan Cohen: And then lottery sales have grown, I think it’s like 18 of the last 20 years or something. Until COVID, we’re, you know, setting records every year and there’s just this never-ending appetite among legislators for more gambling money. You know, they’re never going to say no to more tax revenue. So you know, lottery commissions, they’re charged. Their job is to make more money for states as much money as they can.
Chris Hayes: It’s like lotteries weren’t enough. And now, we see the growth of legalized gambling, state-sanctioned legalized gambling —
Jonathan Cohen: Yeah.
Chris Hayes: — which is not like direct funding, usually, but, you know, it will be taxed at very high rates, with basically the same promise. So, you know, casinos started with riverboat casinos, then it’s downtown casinos. Now, it’s like New York is talking about it like, I don’t know, like a downtown casino New York. It drives me insane.
Jonathan Cohen: I mean, I don’t know if New York is there, but, you know, sports betting on your phone, right, which is actually —
Chris Hayes: Dude.
Jonathan Cohen: — in the way that lotteries set the stage for sports gambling. Sports gambling set the stage for now lottery tickets on your phone.
Chris Hayes: Oh, lottery tickets on your phone?
Jonathan Cohen: Yeah.
Chris Hayes: Does that exist yet?
Jonathan Cohen: In seven states, it does.
Chris Hayes: I got to say, I know this is like slightly adjacent, but like the sports betting on the phone just seems like really dangerous, like, so dangerous. I don’t know if I’m being prudish here, just sort of middle-aged daddish (ph). But like, I don’t know, man, I think you want some slightly higher levels of transactional friction than like clicking around on your phone, put in seven different prop bets and parlays on the night suite of League Pass games on the NBA —
Jonathan Cohen: Yeah.
Chris Hayes: — which like I will say, as someone who, like, does not tend to buy gambling and doesn’t gamble, itself it’s like kind of enticing to me, as someone who doesn’t even gamble.
Jonathan Cohen: Right.
Chris Hayes: Like, you’re sitting here and watch the game, put a little action on it. Like, you’d press a few buttons, I don’t know, it seems dangerous.
Jonathan Cohen: And I can’t remember if it’s FanDuel or DraftKings, but the tagline, like, basically make the games more fun or you know —
Chris Hayes: Yeah.
Jonathan Cohen: It’s totally right. And I will say just in terms of adding more friction, I would love to see the same thing for like Robinhood or crypto. There are other things you can do on your phone —
Chris Hayes: Totally.
Jonathan Cohen: — where there’s little barrier and you can lose so much money so fast.
Chris Hayes: Yeah. I mean, like, you’re right. They make the games more fun. You know, it’s 11:45 in the(ph) East Coast. And you, Chris Hayes, are watching a League Pass battle between the Orlando Magic and the Sacramento Kings.
Jonathan Cohen: First of all, why are you doing this?
Chris Hayes: Well —
Jonathan Cohen: The Kings are good. You know, but why?
Chris Hayes: It’s good for my brain.
Jonathan Cohen: Yeah.
Chris Hayes: It weirdly calms my brain down. Like, I have no rooting interest in the Kings and the Magic.
Jonathan Cohen: Right.
Chris Hayes: But like, I don’t know, just put 20 bucks on it. Like —
Jonathan Cohen: And as my wife find out the first time we went to a casino and watched the Western Conference Finals between the Warriors and the Rockets, like you put $5, $20 on a game, you all of a sudden have the most rooting interest you’ve ever had in the game —
Chris Hayes: Absolutely.
Jonathan Cohen: — in your entire life.
Chris Hayes: That’s right.
Jonathan Cohen: Yeah.
Chris Hayes: Yeah. I mean, I guess what it comes back to, right, is like, OK, so there’s like a distributional aspect to the lottery. And then there’s, like, this sense of like having a wild animal on a leash. Right? That is gambling and its primal force and, like, using the wild animal to get you to where you want to go, but always worried that they’re going to escape, right?
Jonathan Cohen: Yeah.
Chris Hayes: It definitely feels like that, to me, right now with sports gambling. But there’s also just this incentive for constant growth that I don’t know when it ever hits up against any kind of limit.
Jonathan Cohen: Well, it doesn’t. And you know, talk about being off the leash, I think, you know, if you’ve read the New York Times and the Bloomberg reporting on the sports gambling industry, I think these companies, both lotteries and sports betting, the foxes are in the henhouse —
Chris Hayes: Right.
Jonathan Cohen: — right in terms of lobbying and getting states to add more games, to add more variety, to make things cheaper, to break down regulatory barriers, you name it. They own us hook, line, and sinker already.
Chris Hayes: Should we abolish the lottery?
Jonathan Cohen: I think it’s time. I don’t think it’s going to happen.
Jonathan Cohen: You do. Do you think we should get rid of state lotteries?
Jonathan Cohen: I think we do. I think we should. The gambling will continue. I mean, I make no, you know, jokes about that. You know, people are going to keep betting. But there is no way, you know, without the cooperation of a state government or these companies, that Americans are going to bet about $98 billion a year on lottery tickets. And you know, the 5 percent, 1 percent of players are still going to find a way to play. But ultimately, these games are not serving the common good, and in fact, I think are doing more harm than good, overall.
Chris Hayes: Well, wait, let’s go back to the original point you were making about sort of against the sort of paternalist banning, right?
Jonathan Cohen: Yeah.
Chris Hayes: Like, this idea that, like, it’s a tax on people that, you know, can’t calculate expected value. But people are getting some utility out of it. And you know, people can choose how to spend their disposable income however they want. It’s not like cigarettes, it doesn’t have tangible physical harm to people.
Jonathan Cohen: Right.
Chris Hayes: So it’s not in the same category. Honestly, it’s not even like a, you know, alcohol, which is, you know, probably more dangerous for you in a physical sense than like buying a bunch of lottery tickets. So, like, what’s the harm?
Jonathan Cohen: Right. You’ll be shocked to hear, you know, I don’t think we should, like, ban lotteries and then criminalize them. And anyone found with a number slip in their pocket, like, needs to go to jail —
Chris Hayes: Right.
Jonathan Cohen: — like, you know, we did for a long time with weed. You know, I just don’t think we need the cooperation of state governments and enticing people to gamble and having a financial stake in enticing more people to gamble more money. Again, I suffer no illusion that any state is actually going to ban its lottery. I think the more realistic and maybe even better solution is that states just pare them down to sort of their barest elements, without sort of enticing and without luring a new generation of people to play, so that there is gambling available, but not in such a way that it’s going to warp your perception about your odds of a new life.
It’s not going to addict people. You know, addiction by design, you know, estimates that as many as 1 percent of American adults qualify as having a gambling disorder. That’s not going to exacerbate those problems. And ultimately, you know, young people don’t seem to be interested in lotteries anyway. So hopefully, sort of over time, the games just fade away.
Chris Hayes: Oh, is there a big cohort effect here?
Jonathan Cohen: Yeah. I mean, my thesis, you know, totally unprovable and impossible to know, is that these younger generations, you know, they’re doing crypto or they’re doing Robinhood, or they’re doing sports betting instead. Like, why would you —
Chris Hayes: Right.
Jonathan Cohen: — play a game that’s total absolute chance, when you can play a different equally chance game, but at least gives you the perception of being smarter than everybody else —
Chris Hayes: Right.
Jonathan Cohen: — and that’s just as accessible on your phone?
Chris Hayes: Right. And there’s also the sheer randomness lottery doesn’t create a kind of, like, adjacent industry of like foe beat the market knowledge that, you know, the sports gambling, it’s like, there’s so many people being, you know, offering their special —
Jonathan Cohen: Right.
Chris Hayes: — prop cocktail of views of, like, take the dogs on —
Jonathan Cohen: Right.
Chris Hayes: — the road, like every dog on the road, and whatever it is, like, underdog on the road, you know.
Chris Hayes: Or the Georgia Bulldogs, you know.
Chris Hayes: Or the Georgia Bulldogs —
Jonathan Cohen: Yeah.
Chris Hayes: Yes.
Jonathan Cohen: Georgia is a good bet. Yeah.
Chris Hayes: The Georgia Bulldogs to cover was a good bet.
Jonathan Cohen: Yeah. So you can feel lucky and you can feel chosen, but you can’t feel smart with lottery.
Chris Hayes: That’s right. That’s exactly right.
Jonathan Cohen: Yeah.
Chris Hayes: That’s right. Yeah, that’s interesting. So you think it’s just a displacement effect. But then the problem is the natural one-way ratchet to this is, like, aren’t the state lottery is going to come back with some weird version of their own thing that feels like it has some, you know —
Jonathan Cohen: Yeah. Or more like the company is going to create it and sell it, you know, and get the state onboard to add it. But this has been a long trend. States introduced scratch tickets in the ‘70s because there was a bunch of old people buying these old raffle tickets, and they couldn’t get young people to play, so they added scratch tickets. And then these big Powerball, you know, Mega Millions-type jackpots also is sort of another gateway drug in the ‘80s and ‘90s to get younger people to play.
Now, they need a new gateway drug. For now, it’s been online ticket sales, which again, we’ll see if they are able to compete with these other ventures that we’ve already described. More likely, I’ll have to write another book in 20 years because there’ll be some other new wave, and the lotteries of today will look as equally as quaint and ridiculous as the lottery of New Hampshire from 1964.
Chris Hayes: I mean, the thing that I weirdly keep coming back to and maybe, like, I don’t know if I’m just in this intellectual mode recently, or just like the way I’m thinking of just, like, there’s just something fundamental in us, right?
Jonathan Cohen: Yeah.
Chris Hayes: Like, the games of chance and our draw to it is with us, man. And I guess, you know, obviously, it’s historically, culturally, institutionally constructed, right? There are places that gamble more or less. But, man, does it feel like a real primal part of us?
Jonathan Cohen: Totally. And that’s totally fair, you know, the 1976 Gambling Commission, their opening words of their final report are gambling is inevitable. And I think that’s right. But it’s not inevitable that we go to $98 billion a year. You know, it’s not inevitable that we have these companies that just push and push and push more tickets down people’s throats, and that the state sort of uses its imprimatur of legitimacy to sell these tickets.
Chris Hayes: Are the contractors competitive now? Like, are there a bunch of different companies in this space that are getting different state contracts and competing with each other, or is it pretty like, you know, defense contracting?
Jonathan Cohen: Yeah. There’s two big ones basically, Scientific Games, which I mentioned, and then IGT, formerly known as GTECH, that started as sort of the purveyor of Mega Millions, Powerball-type games tickets. And now, they just sort of bounced back and forth.
It used to be more fun in the ‘80s and ‘90s. They would, like, sue each other all the time, and they would like try to crack each other’s tickets to prove that the security wasn’t good. And now, they just like —
Chris Hayes: What?
Jonathan Cohen: — make the money and go home. Yeah.
Chris Hayes: So they just have a duopoly basically?
Jonathan Cohen: Yeah. I mean, there are other companies. But Scientific Games, as far as I can tell, has 30-plus of the 45 ticket contracts to print instant tickets, and then 70 percent of the global market for instant tickets. So not just American lotteries, but scratch tickets like all over, in the countries all over the world.
Chris Hayes: What do other countries do about this?
Jonathan Cohen: So other countries have lotteries, some of which sort of rival the U.S. And just to your point about sort of this inexorable American desire to gamble, I think Australia rivals us as far as I can tell in sort of their appetite for betting. But in countries like China —
Chris Hayes: I mean, no one can beat the Chinese.
Jonathan Cohen: Right.
Chris Hayes: I mean, that is a place and a culture where gambling is incredibly, incredibly central.
Jonathan Cohen: Right. Less so the lottery there, but —
Chris Hayes: Yeah.
Jonathan Cohen: — both China and Taiwan sort of have this unique arrangement where the lottery sort of split into two. There’s like a lottery sort of as we know it. And then there’s also called like the sports lottery, but it’s really just sports betting, but it’s —
Chris Hayes: OK.
Jonathan Cohen: — run under the lottery administration. I think the best example here are countries like Spain and Italy, which have these equally gratuitous, massive jackpots, you know, couple million, many millions, many billions, whatever. But the distribution is totally different. Whereas, you know, the jackpot that was won in November was won by one person. Whereas the Spanish lottery will be won by like 14,000 people, each of whom get like 1.8 million or something, in a way that is totally indicative, I think, of this sort of individualistic structure that we have known, I guess.
Chris Hayes: That is so wild.
Jonathan Cohen: Yeah.
Chris Hayes: But it also just makes so much more sense and seems so much better.
Jonathan Cohen: It does, except the American lotteries used to do this and people basically wanted bigger prizes.
Chris Hayes: Oh, yeah. No. Totally. I think it’s totally demand-driven. Absolutely.
Jonathan Cohen: Yeah.
Chris Hayes: I think people want to, like, buy the ticket for the 5 billion higher, higher, bigger, more.
Jonathan Cohen: Right.
Chris Hayes: But as a policy matter, or it just seems like a better arrangement.
Jonathan Cohen: Yeah.
Chris Hayes: I remember, like, my uncle used to play some foreign lottery, but it was like a lottery for people that had a lot of money. So, like, the tickets were like $1,000 or something. And that always struck me as interesting and, like, maybe that would be better, like, distributionally.
Jonathan Cohen: I mean, going back a long way, this is how you get the numbers games, which started as something called policy, which started as a game called the insurance policy, because poor black people basically couldn’t afford a full lottery ticket because it was like $2.50, and I’m talking like 1812 when $2.50 was a lot of money.
Chris Hayes: Right.
Jonathan Cohen: So you’d buy like a share of a ticket, or a fraction of a fraction of a ticket. And that ultimately became a game in and of itself. But that basically used to be the case in the early American history. The tickets were the equivalent of like a luxury good, and only recently —
Chris Hayes: Wow.
Jonathan Cohen: — you know, relatively speaking, have they become sort of more democratized and more accessible, a lesson we learned from numbers games.
Chris Hayes: I mean, it’s so funny, the more I read and think about like that word democratize, which has a kind of, like, obviously positive valence. It’s just like the favorite word of, like, incredibly nefarious actors trying to sell something. We’re democratizing crypto, democratizing —
Jonathan Cohen: Right. Democratizing gambling addiction. Yeah. One, that’d be fun. Yeah.
Chris Hayes: Yeah. Right. Exactly. Like, now, everyone can have access to this. Jonathan Cohen is author of For a Dollar and a Dream: State Lotteries in Modern America. He’s a program officer to the American Academy of Arts and Sciences. I learned so much during this hour. Thank you, Jonathan.
Jonathan Cohen: Thanks, and good luck, everyone.
Chris Hayes: As always, great thanks to our guest, Jonathan Cohen. I learned a lot there. Do you know about lotteries in the colonial era? I did not. That was great.
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“Why Is This Happening?” is presented by MSNBC and NBC News, produced by Doni Holloway and Brendan O’Melia, engineered by Bob Mallory, and features music by Eddie Cooper. You can see more of our work, including links to things we mentioned here, by going to nbcnews.com/whyisthishappening.
Tweet us with the hashtag #WITHpod, email WITHpod@gmail.com. Follow us on TikTok by searching for WITHpod. “Why Is This Happening?” is presented by MSNBC and NBC News, produced by Doni Holloway and Brendan O’Melia, engineered by Bob Mallory and features music by Eddie Cooper. You can see more of our work, including links to things we mentioned here, by going to nbcnews.com/whyisthishappening.