Photo courtesy of the U.S. War Department via The National Archives. Modified by Curiousmatic.

How States Started Running Multi-Billion-Dollar Gambling Businesses

We’re currently in the third wave of gambling popularity in the U.S.

With recent record jackpots of $656 million in Mega Millions and $590 million in Powerball, the popularity of lotteries in the U.S. seems to be on the rise. The jackpot is predicted to top $1 billion some time in this decade, USA Today reported last year.

In the fiscal year of 2012 (which ends June 30), lottery sales across the U.S. totaled $78 million, according to the North American Association of State and Provincial Lotteries.

The lotteries, which exist in 43 states as well as Washington D.C. and the Virgin Islands, are all operated by government entities. Private lotteries are illegal in the U.S.

That’s a fairly new state of affairs, however; before 1964 (all the way back until 1894), there were no legal lotteries in the U.S., according to a paper by the library of California.

Looking back

The paper states that we’re considered to be in a “third wave” of gambling in the U.S., and traces the history back to the 1600s, when early colonies were funded by state-run lotteries. This first wave lasted all the way through the fight for independence (although the Crown tried to prevent it), until the early 1800s when popular sentiment rose against gambling, considering it immoral.

Gold rushes in the West, however, most notably in California, fueled a boom in gambling that lasted from the mid-1800s to the 1890s, when public opinion again drove lawmakers to ban it.

The third wave is considered to have lasted from the 1930s until now, starting in the depression as many forms of gambling became legal again in order to drive state revenue.

It fueled a larger interest in gambling in general, however, and many organized criminals took advantage of this, creating hugely profitable gambling operations.

In fact, while the state has periodically either ran its own gambling operations, or worked to shut them all down, private individuals have always been running gambling businesses, whether legal or not.

Illegal lotteries

Between 1894 and 1964, when no government lotteries existed, mobsters ran the “numbers” lottery game, which one author estimated to have had a total wager of $5 billion dollars, the California library paper states.

The Irish sweepstakes, raising proceeds for hospitals in Ireland, had a participation rate of about 13% of the entire U.S. population since its inception in 1930.

With growing opposition to tax increases in the ‘60s, however, states decided to capitalize on this success, and in 1964 New Hampshire established the first state lottery. Others followed suit, and the number of state lotteries grew steadily.

Today, the only states where state lotteries are not available are in Nevada, Wyoming, Utah, Alabama, Mississippi, Hawaii and Alaska.

Do you play the lottery? Did you know private businesses couldn’t run lotteries? Tweet @curiousmatic

Ole Skaar