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Massachusetts Lottery Broken

Soulskill posted more than 2 years ago | from the math-nerds-win-again dept.

The Almighty Buck 376

wiredog sends in a story about how knowledge of lottery rules and statistics has allowed opportunistic players in Massachusetts to spend hundreds of thousands of dollars on tickets while being assured of a massive payoff. Quoting: "Because of a quirk in the rules, when the jackpot reaches roughly $2 million and no one wins, payoffs for smaller prizes swell dramatically, which statisticians say practically assures a profit to anyone who buys at least $100,000 worth of tickets. During these brief periods — 'rolldown weeks' in gambling parlance — a tiny group of savvy bettors, among them highly trained computer scientists from MIT and Northeastern University, virtually take over the game. ... Srivastava calculated that a gambler who bought 200,000 Cash WinFall tickets during four rolldown weeks in a year would win enough to cover the $1.6 million investment and earn a profit of $240,000 to $1.4 million — without ever winning the jackpot."

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376 comments

Wait, what? (5, Funny)

Jeng (926980) | more than 2 years ago | (#36951004)

I thought the lottery was for those who were bad at math?

Re:Wait, what? (3, Funny)

Thud457 (234763) | more than 2 years ago | (#36951064)

Apparently Massachusetts thought that meant people who are bad at math should be running the lottery. A critical mistake in the state that's home to Stanford.

Re:Wait, what? (1)

MarkvW (1037596) | more than 2 years ago | (#36951094)

Ah, you should have RTFA. Massachusetts still makes money on the game.

Bingo! (5, Insightful)

Gription (1006467) | more than 2 years ago | (#36951190)

The point of the lottery is simply to make money for the state. There isn't any reason that it must be impossible to make money off of it unless that keeps the state from making money on it.

Re:Bingo! (1)

jayveekay (735967) | more than 2 years ago | (#36951400)

I think the point of the lottery is to make as much money as possible for the state. That's why the state advertises lotteries so heavily.

If the state eliminated the rolldown weeks, and just ran the lottery the same way with the same payouts every week, would the state make more money?

Re:Wait, what? (1)

Anonymous Coward | more than 2 years ago | (#36951106)

Apparently Massachusetts thought that meant people who are bad at math should be running the lottery. A critical mistake in the state that's home to Stanford.

Um, Stanford is in CA.

Re:Wait, what? (1)

WatchMaster (613677) | more than 2 years ago | (#36951114)

Stanford is in California.

Re:Wait, what? (0)

Anonymous Coward | more than 2 years ago | (#36951142)

I think you meant MIT, or Harvard. Stanford is not in MA.

Re:Wait, what? (2, Informative)

Anonymous Coward | more than 2 years ago | (#36951186)

Really?

My understanding is that this is the system working as intended. They don't want the jackpot to continually grow unchecked so when it reacher a certain size they pay out more on the smaller wins. My mother told me a similar story about older electronic slot machines. Basically the natural probability of winning was too low so they had to write a forced payout routine to make sure that the machines payed out the percentage of the time the casino's wanted (remember casinos want you to win often enough that you keep playing).

uk fruit machine work like that and they cheat you (1)

Joe_Dragon (2206452) | more than 2 years ago | (#36951288)

uk fruit machines work like that and they cheat you as well.

Re:Wait, what? (2)

HarrySquatter (1698416) | more than 2 years ago | (#36951242)

Good thing your specialty isn't geography. You're about 2600 miles off the mark for where Stanford resides.

Whoosh! (0)

Anonymous Coward | more than 2 years ago | (#36951616)

Whoosh!

Re:Wait, what? (0)

Anonymous Coward | more than 2 years ago | (#36951310)

stanford is in california

Re:Wait, what? (2)

erroneus (253617) | more than 2 years ago | (#36951386)

Wait! I want to say it it!!!

Stanford is in California!!! Yay! I feel great now!

Also Sanford and Son is in California.... fun old TV show that was.

Re:Wait, what? (0)

Anonymous Coward | more than 2 years ago | (#36951402)

Ignoring the bit about Stanford being in California (Massachusetts is home to MIT and Harvard, which are best known for being MIT and Harvard, respectively), it looks like you're right, but even worse than that, they knew about this for nearly a decade!

Apparently they've learned from the video game industry (of which there isn't one in Massachusetts, but that's beside the point) and went the route of all online game companies when someone discovers a massive flaw in their game: declaring it "working as intended." At some point after this article, they'll probably get around to the second half, "silently patch it and ignore it ever happened."

Re:Wait, what? (0)

Anonymous Coward | more than 2 years ago | (#36951620)

Apparently Massachusetts thought that meant people who are bad at math should be running the lottery. A critical mistake in the state that's home to Stanford.

So, Stanford is in Massachusetts now? I could have sworn it was on the left coast...

Re:Wait, what? (2)

MozeeToby (1163751) | more than 2 years ago | (#36951124)

Only for those who are bad at math if you ignore the fact that $100,000,000 is worth much more than 100,000,000 times $1; at least to people's mind's. That is, $1 has very nearly zero utility, while anything above a certain amount (say $10,000,000) has nearly infinite utility. Even a poor person isn't going to significantly miss $3 per week, but a large multimillion dollar payoff properly managed will leave a person set for life (or buy whatever a person could want for a limited amount of time). And it makes sense, the error is in trying to assign static value to a given value of money while the human brain (correctly) doesn't do that.

Re:Wait, what? (2)

Rising Ape (1620461) | more than 2 years ago | (#36951158)

It's really the other way round though. A jump in income of 100,000 to 200,000 is worth much less in terms of quality of life than from 10,000 to 20,000.

Re:Wait, what? (1)

0123456 (636235) | more than 2 years ago | (#36951296)

A jump in income of 100,000 to 200,000 is worth much less in terms of quality of life than from 10,000 to 20,000.

Were it not for punitive income tax, an extra $100k a year on my salary would allow me to comfortably retire after a decade; an extra $10k certainly wouldn't. I don't believe lottery winnings are taxed, so a $1 million win would be enough for me to never have to work at anything I didn't want to do for the rest of my life.

Re:Wait, what? (0)

HarrySquatter (1698416) | more than 2 years ago | (#36951374)

I don't believe lottery winnings are taxed

Please tell me you're trolling. You're not really this stupid, are you?

Re:Wait, what? (2)

MoonBuggy (611105) | more than 2 years ago | (#36951556)

There's no tax on lottery winnings in the UK, a country which is very similar to the US in many ways. I know the article is specifically about Massachusetts, but being so rude about what was, in fact, a quite reasonable assumption just makes you look like an asshat.

Re:Wait, what? (1)

mjperson (160131) | more than 2 years ago | (#36951398)

You don't believe lottery winnings are taxed? Why would you think that? It's income, no?

Re:Wait, what? (1)

afidel (530433) | more than 2 years ago | (#36951512)

State run lotteries are almost universally untaxed, only in the US does the state double dip.

Re:Wait, what? (1)

pjt33 (739471) | more than 2 years ago | (#36951404)

Are you in your 50s or planning to move to somewhere where the average wage is about $10k?

Re:Wait, what? (0)

Anonymous Coward | more than 2 years ago | (#36951434)

Please let us know if you ever win the lottery or have a cash windfall. The IRS pays finders fees for reporting tax evasion.

Re:Wait, what? (1)

DrgnDancer (137700) | more than 2 years ago | (#36951458)

Lottery winning are totally taxed. They get you coming and going.

Re:Wait, what? (1)

larry bagina (561269) | more than 2 years ago | (#36951482)

Lottery winnings are subject to state* and federal taxes (*a handful of states don't tax lottery winnings).

Re:Wait, what? (1)

MBGMorden (803437) | more than 2 years ago | (#36951502)

In the short term however, going from $100,000 per year to $200,000 will typically mean that you can get a house with a pool instead of without, can get the nice 26-foot boat that you wanted instead of the 19-footer, and that you can drive a Jaguar instead of a really nice Honda.

Going from $10k to $20k typically means that you're no longer living on the street boiling ramen noodles over a fire-barrel.

Or as Chris Rock put it (paraphrased): "Poor people should get prenups, not rich people. Think about it: if you make $30 million per year and your wife wants half, then it's not that big a deal. But if you make $30 thousand, and your wife wants half, you just might have to kill her.".

Re:Wait, what? (1)

DrgnDancer (137700) | more than 2 years ago | (#36951444)

I agree, and will often spend a buck or two on lottery tickets for that reason. The problem is that people who are poor will often spend more than they can afford on lottery tickets in the mistaken belief that they are significantly effecting their odds of winning. Spending $50 or $100 a week on lottery tickets costs money that could be spent on other things, and doesn't really have any noticeable affect on your odds of winning. Even spending $100,000 on tickets doesn't have a statistically significant effect really, except under the special circumstances that Massachusetts has created here.

Re:Wait, what? (1)

Anonymous Coward | more than 2 years ago | (#36951138)

http://www.smbc-comics.com/index.php?db=comics&id=2320

Re:Wait, what? (1)

Rich0 (548339) | more than 2 years ago | (#36951200)

Well, no, the lottery benefits people who are good at math, at the expense of those who are bad at math.

Just, in most states they try to have people who are good at math be the ones DESIGNING the lottery...

Re:Wait, what? (1)

timeOday (582209) | more than 2 years ago | (#36951222)

Actually no math is necessary - all people need to know is that during "rolldown week," the expected return of playing the game is positive. This is just as true for people who spend $3 as for people who spend $300,000. So I think it is debatable whether this is "broken" at all. It's probably not something a private company would do; then again they might have loss leaders sometimes.

Re:Wait, what? (2)

petershank (463008) | more than 2 years ago | (#36951304)

during "rolldown week," the expected return of playing the game is positive. This is just as true for people who spend $3 as for people who spend $300,000.

The article said otherwise:

Mark Kon, a professor of math and statistics at Boston University, calculated that a bettor buying even $10,000 worth of tickets would run a significant risk of losing more than they won during the July rolldown week. But someone who invested $100,000 in Cash WinFall tickets had a 72 percent chance of winning

Re:Wait, what? (3, Informative)

jacks0n (112153) | more than 2 years ago | (#36951422)

That comment is about variance, not expected value. EV/ticket is the same whether you buy one ticket or one million tickets.

Re:Wait, what? (1)

ultranova (717540) | more than 2 years ago | (#36951346)

I thought the lottery was for those who were bad at math?

Only if you're rich. If you're poor, the small chance of winning * the utility of getting rich is far greater than the great chance of losing * the small utility of the price of a lottery ticket, thus making the total utility greater than zero.

The utility (value) of money is an s-curve that asymptomatically but monotonically nears a fixed value in both extreme debt and extreme wealth.

Re:Wait, what? (0)

Anonymous Coward | more than 2 years ago | (#36951562)

There's still too much uncertainty, though; barring mathematical exceptions such as those in the article, you're much better off diverting your lotto ticket fund into, for example, beer.

Re:Wait, what? (0)

Anonymous Coward | more than 2 years ago | (#36951508)

"I thought the lottery was for those who were bad at math?"
It still is for those poor at math, because it's played by millions and only a handful win. Either by luck or wits, their numbers are still insignificantly small compared to the total.

Still, they won't alter their system unless one of two things happen, they stop making money, or get hassled because of that hole.
Even if the second happens, I doubt anything will change while they make a healthy profit.

This got me wondering though, what other lotteries have flaws like that? And for how long have they've been exploited?

Formula (2)

Toe, The (545098) | more than 2 years ago | (#36951008)

1. Buy $100,000+ in lottery tickets
2. ???
3. Profit! ...but for real.

All I Can Say (1)

Mikkeles (698461) | more than 2 years ago | (#36951012)

is good for them!

You all laughed when .... (3, Funny)

140Mandak262Jamuna (970587) | more than 2 years ago | (#36951080)

Guys, you were all laughing when I bought the lottery tickets from Dogbert 50% off. He assured me that the odds of winning are just one one millionth less, but the price was 50%, count them full fifty percent off. You guys were taunting me for buying the previous day's tickets. Ha! Who is laughing now?

Re:You all laughed when .... (1)

rubycodez (864176) | more than 2 years ago | (#36951202)

I'll sell you next year's winning numbers for 90% off. minimum purchase $500,000. Cash in your retirement account and hop on my gravy train!

Oh I see (4, Insightful)

JoshuaZ (1134087) | more than 2 years ago | (#36951084)

I see now. So as long as people have bad ideas about statistics it is ok. Believing some numbers are lucky is ok. Ignorant people saying things like "I haven't won and I've been playing for years, I have to win soon" is ok. Having people believe that God told them to buy a lottery ticket is ok. But when one someone actually has a chance to be correct about having a chance to win and make a profit then it isn't ok. Why don't the governments stop pretending. The lottery is intended on a tax for those who can't do math. And most of those people can't do math because the government schools failed to teach them. The government wants to use a lottery so it can get extra money from poor, uneducated people while pretending to have a progressive tax system which doesn't hurt the poor.

Re:Oh I see (1)

the_humeister (922869) | more than 2 years ago | (#36951164)

Quiet you! I just bought $600k worth of tickets in this game!!!

Re:Oh I see (4, Insightful)

rubycodez (864176) | more than 2 years ago | (#36951238)

that is false, plenty of people understand the math perfectly but play anyway. You don't understand the nature of three-quarters the people you meet (that's about the fraction of people who gamble at every place I've ever worked, and we're talking college educated people of median income of $85K currently)

Re:Oh I see (1)

ginbot462 (626023) | more than 2 years ago | (#36951538)

My dad had a PhD in engineering, but still played. He just liked it (only spent $20 to $40 when on vacation). He would always say that you can't win by not playing, but I was would say 1 in 7.1 mil (more or less depending on which lottery) rounds to Zero.

Re:Oh I see (3, Insightful)

MBGMorden (803437) | more than 2 years ago | (#36951678)

Indeed. I've failed to see the "tax on the people who are bad at math" argument. Yes, the odds of winning are astronomically high. They are however, non-zero, and someone DOES eventually cash out on the jackpots. Deciding to take a gamble isn't stupid so long as you know and accept the odds.

If you go obsessive over it (ie, dumping loads of money into the lottery as a financial "plan"), then sure, but myself for example - my state has had the lottery for about 10 years now. In those 10 years, I've bought about 8 or so lottery tickets. So I'm spending less than a dollar per year on average. Still haven't won, and don't think I realistically ever will, but it's not too much of a financial burden to gamble away at a long shot (yes, a really, really LONG shot).

Basically, I go by the advice my dad taught me while playing cards - expect that you're going to lose every bet you ever make. If you're not ok with that outcome, then don't make the bet in the first place.

Re:Oh I see (2, Insightful)

Lemmy Caution (8378) | more than 2 years ago | (#36951566)

Lotteries are played by most people as entertainment, not as investments.

wat? (0)

Anonymous Coward | more than 2 years ago | (#36951090)

These people have $1.6 MILLION dollars and the best they can do with it is cheat the system? Sounds like they'd already found a nice way to make money before that.

Re:wat? (2)

rbrausse (1319883) | more than 2 years ago | (#36951248)

15-87,5% profit. without risk.

they made an economical decision how to invest the 1.6M - and it is a very lucrative investion.

Re:wat? (1)

frinkster (149158) | more than 2 years ago | (#36951588)

15-87,5% profit. without risk.

they made an economical decision how to invest the 1.6M - and it is a very lucrative investion.

It is not without risk. If someone wins the jackpot for that drawing, they win exactly zero dollars. According to the article, that has happened once before. Additionally, the article mentions that if you buy $100,000 in tickets you have a 72% chance of winning more than $100,000. It is not guaranteed.

Same with progressive slot machines (4, Interesting)

Anonymous Coward | more than 2 years ago | (#36951096)

I used to code slot machines, hence staying anonymous. At some point, a different point for each bank of slots, the pay tables will reach over 100% payout if the jackpot is large enough. It was well known that by that point, professional gamblers and their buddies would squat on each machine tied to the progressive payout and play them until one of them hit the jackpot. The casinos didn't care, nor should they, because the overall pay table was still 95% or 90%. In other words they still made their money on the masses. But if you as an individual watch closely enough, in the short term you can make money.

Somewhat unrelated, there are also video poker machines that if played "perfectly" will earn you about $8 / hour statistically, although you may have to put in considerable hours before seeing the profit. Again it all depends on how the pay table is structured.

Re:Same with progressive slot machines (2)

Toe, The (545098) | more than 2 years ago | (#36951178)

Somewhat unrelated, there are also video poker machines that if played "perfectly" will earn you about $8 / hour statistically, although you may have to put in considerable hours before seeing the profit. Again it all depends on how the pay table is structured.

Hm. $8/hour to play video games? Does sound better than flippin' burgers, but no real opportunity for advancement...

Re:Same with progressive slot machines (1)

HarrySquatter (1698416) | more than 2 years ago | (#36951276)

Except that in most places McDonalds pays more than $8/hour to flip burgers

Re:Same with progressive slot machines (0)

Anonymous Coward | more than 2 years ago | (#36951432)

The American dollar isn't money anymore. I'd rather be paid in Canadian Tire money.

Re:Same with progressive slot machines (0)

Anonymous Coward | more than 2 years ago | (#36951286)

Per machine... can you play 3 at once?

Re:Same with progressive slot machines (1)

ginbot462 (626023) | more than 2 years ago | (#36951598)

I've done that with some (probably older) video poker tables. But honestly, I did it because they were at the bar to get my free drinks even easier.

That's what you get for exploiting your citizens (1)

elrous0 (869638) | more than 2 years ago | (#36951112)

I'm all for freedom to live your life the way you want and all that. But for the *state* to openly exploit its citizens with these parasitic lotteries makes my stomach turn. Rather than raise taxes, let's exploit out poorest and dumbest citizens! Yea!!!

Serves them right. Fucking vampires.

Re:That's what you get for exploiting your citizen (2)

shentino (1139071) | more than 2 years ago | (#36951244)

I'd rather the state grab it and put it to good use, rather than crooks grabbing it and putting it to uses that only benefit themselves.

For an ironic twist, if I was a governor, I'd create a lottery and put the proceeds into education :)

Re:That's what you get for exploiting your citizen (3, Informative)

i.r.id10t (595143) | more than 2 years ago | (#36951302)

Thats what we did in Florida. All lottery funds are used for education.

Unfortunately they've cut *all* other funding sources for education... so sure since the late 80s the lottery has given over 10 billion to education... and the first few years were gravy... but now the lottery is the *only* funding source for education ...

Re:That's what you get for exploiting your citizen (1)

TheNastyInThePasty (2382648) | more than 2 years ago | (#36951450)

I just came here to post this. I'll. just post a link instead: Bright Futures [slashdot.org]

Re:That's what you get for exploiting your citizen (1)

TehNoobTrumpet (1836716) | more than 2 years ago | (#36951612)

I was in one of the last high school classes in Florida to get Bright Futures, a scholarship that gives either 75% or 100% towards tuition in Florida schools.
They're cutting education, because, pffft, who needs it, right?

Re:That's what you get for exploiting your citizen (0)

Anonymous Coward | more than 2 years ago | (#36951320)

At least in my state, all proceeds from the lottery (and scratch tickets, etc.) already go to education funds.

Re:That's what you get for exploiting your citizen (1)

Mike (1172) | more than 2 years ago | (#36951452)

Spoken like a true statist.

Re:That's what you get for exploiting your citizen (1)

Alien Being (18488) | more than 2 years ago | (#36951540)

So would we, the citizens of Massachusetts. Instead, the lottery commission has created thousands of high-paying, do-little jobs for government insiders. Payouts to the cities and towns aren't nearly what they should be. In other words, the state is the crook.

Re:That's what you get for exploiting your citizen (1)

PRMan (959735) | more than 2 years ago | (#36951544)

That's what was promised to happen in California. And it did. But within 2 years the state pulled back equal amounts of general funding that used to go to the schools.

"WOULD win" (0)

Anonymous Coward | more than 2 years ago | (#36951118)

ie it hasn't been field tested - if he was certain of the math he would have kept quiet and remortgaged the house.

WAD (0)

Anonymous Coward | more than 2 years ago | (#36951144)

They are making a profit and people are playing it regularly. It sounds like it is Working As Designed.

NYSE is more lucrative (0)

Anonymous Coward | more than 2 years ago | (#36951152)

The big boys do this on the stock exchanges...

Re:NYSE is more lucrative (1)

0123456 (636235) | more than 2 years ago | (#36951336)

The big boys do this on the stock exchanges...

But that the game is fixed: the banks always win.

Re:NYSE is more lucrative (1)

TehNoobTrumpet (1836716) | more than 2 years ago | (#36951656)

The state always makes money. It's just that there's a second player here who knows the system and has a good chance of winning too.

Government run gambling bad idea (0)

Anonymous Coward | more than 2 years ago | (#36951192)

because when someone games the system, no extralegal means to "take care of the problem" are available. i say that the state subcontract its gambling operations to the MAFIA, who know how to deal with people who find flaws in their systems.

The problem is the same as the stock market (1)

voss (52565) | more than 2 years ago | (#36951214)

As long as there is at least the appearance of fairness(even assuming long odds), everything is Ok.
When people start believing the game is rigged (whether true or false) they
refuse to play anymore.

the most interesting thing (1)

papasui (567265) | more than 2 years ago | (#36951268)

Is that the lottery officials know full well that it's broke but they don't care.

not broken at all (4, Informative)

rubycodez (864176) | more than 2 years ago | (#36951322)

"Broken" would mean the state was losing money. Your definition of "broken" needs fixed, you are jealous savvy people with enough money to invest can win at certain times

SOP (1)

tekrat (242117) | more than 2 years ago | (#36951274)

Standard Operating Procedure: To make money, you gotta spend money. And those with a lot of money tend to make more money.

If you've got the 1.6 million to invest, chances are that you're *already* smart enough to know how to make more money with that money.

Unless of course, you're investing in Chinese Shell Companies set up to win investment before they implode.

Re:SOP (-1)

Anonymous Coward | more than 2 years ago | (#36951498)

Unless of course, you're investing in Chinese Shell Companies set up to win investment before they implode.

American financial institutions are far more likely to implode than Chinese companies. Have you ANY idea how much debt you're in???

"Broken" (1)

rpresser (610529) | more than 2 years ago | (#36951292)

The word "Broken" in the title refers to what the lottery is, not what happened to it.

Winnings taxable? (2, Insightful)

jayveekay (735967) | more than 2 years ago | (#36951334)

"A lottery agent who sells tickets to the group said Tong’s Fortunelot invested $200,000 at his store in May and won $280,000."

The $200,000 investment would presumably be after tax money. The 280,000 dollars in winnings would be taxable. At the Bush Tax Cut marginal rate of 35% that would leave 182,000, for a net loss of $18,000. Presumably the bettors must also be finding a way to game the tax system as well.

Re:Winnings taxable? (1)

Anonymous Coward | more than 2 years ago | (#36951424)

Uh, no.

You get to deduct losses from winnings.

Every ticket that didn't win counts as a loss.

Re:Winnings taxable? (0)

Anonymous Coward | more than 2 years ago | (#36951464)

They would be able to deduct their initial investment of 200,000 dollars for a capital gain of 80,000. They would then pay the appropriate taxes of that amount. Most people wouldn't be able to deduct it as buying 5 dollars a week in lotto tickets would fall under the lower limit for itemized deductions unless they had other things in their portfolio that bumped them above that limit.

Re:Winnings taxable? (0)

Anonymous Coward | more than 2 years ago | (#36951516)

All the non-winning tickets are tax deductible.

Re:Winnings taxable? (1)

Sunshinerat (1114191) | more than 2 years ago | (#36951530)

The expenses on tickets that did not win are tax deductable.
So I guess you will still come ahead, as you have bought plenty of 'loser' tickets.

Re:Winnings taxable? (1)

mcmonkey (96054) | more than 2 years ago | (#36951552)

Loses and expenses can be taken against winnings. I'm not sure if that includes the cost of the winning ticket, but let's assume not.

If the average winning ticket is worth $1000 (a number I just pulled out of my butt after having RTFA in the paper yesterday; I don't recall if it gives an actual average pay-out per ticket), $280,000 means 280 winning tickets. Which also means 99,720 losing tickets.

At $2 per ticket, they pay taxes on $280,000 - 199,440 = 80,560.

Basically, they're only paying taxes on profit, not income, just like any other business.

Since when is playing by the same rules set out for everyone else "finding a way to game the system"?

Re:Winnings taxable? (0)

Anonymous Coward | more than 2 years ago | (#36951554)

Yeah but you only have to pay taxes on your net gambling winnings. If you lost $200k and took in $280k, you're only paying on $80k.

Re:Winnings taxable? (1)

mjperson (160131) | more than 2 years ago | (#36951578)

You pay taxes on the $80,000, not the full $280,000, assuming you kept the receipts for the original $200,000 spent so you can take it as a deduction.

Re:Winnings taxable? (1)

larry bagina (561269) | more than 2 years ago | (#36951586)

If (and only if) you have lottery winnings, your lottery expenses are tax deductible, so you're only taxed on the $80,000 gain.

Re:Winnings taxable? (0)

Anonymous Coward | more than 2 years ago | (#36951592)

You deduct the cost you paid from the profits you made. You're trying too hard to be clever and see a hole in the plan, and instead you're being stupid.

Re:Winnings taxable? (0)

Anonymous Coward | more than 2 years ago | (#36951614)

It's called deductions. tax on the $80k is all that would apply.

Re:Winnings taxable? (1)

rayharris (1571543) | more than 2 years ago | (#36951622)

Only the $80,000 difference would be taxable in the US. You'd get a W-2G that showed you won $280,000, but then you'd list the $200,000 you spent on tickets as an itemized deduction on schedule A.

Re:Winnings taxable? (0)

Anonymous Coward | more than 2 years ago | (#36951634)

You know how I know you don't know anything about the tax system? I hope you don't run a business because you ain't too bright.

Re:Winnings taxable? (0)

Anonymous Coward | more than 2 years ago | (#36951684)

Well, if I'm reading the IRS website [irs.gov] correctly you could deduct a significant fraction of your losses.

You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return. Claim your gambling losses on Form 1040, Schedule A, as a miscellaneous itemized deduction that is not subject to the 2% limit.

Taking your numbers let's say that 3/4 of the invested money was invested into losing tickets. In reality it's probably more like 90% of the money was invested into losing tickets. Assuming a lose of 3/4 of the original $200,000 could you then deduct $150,000 from your income? If that works then only $130,000 is taxable resulting in a net gain of $34,500, a 17% gain on investment.

so next time someone's tying up the checkout line (0)

Anonymous Coward | more than 2 years ago | (#36951352)

at the convenience store, I can yell "Beat it, MIT!"

Better than at the casinos (1)

mathimus1863 (1120437) | more than 2 years ago | (#36951454)

You can find statistical holes in casino games, too. The difference is, the state doesn't kick you out if you win too much.

That is the genius of it (1)

John.P.Jones (601028) | more than 2 years ago | (#36951486)

While playing the lottery is for people bad at math, designing the lottery is for people good at math and if you are very good you let it be rigged in a non-obvious statistical sense. A very serious look needs to be had at those who designed this system.

but do they get to keep it (1)

frovingslosh (582462) | more than 2 years ago | (#36951608)

Do they get to keep it, or do they get it all taken back in Federal and state taxes? It has been pretty obvious that these games that accumulate value based on lack of previous winners will pay out larger amounts, but the taxes on the win and the chances of having to split the jackpot have to be taken into account when considering when to play. It is interesting that Mass came up with a way to increase the value of the lesser prizes, that seems a flawed design that would keep those prizes higher as long as the jackpot remains unclaimed. So poor a design that one wanders if it wasn't intentional to let the game designers have a chance to skim off some of the money.

Article does not say 100% guarantee of winning (1)

Zontar_Thing_From_Ve (949321) | more than 2 years ago | (#36951654)

I found it interesting that the article states that there is "almost no chance of losing" if you buy enough tickets, but that's not a 100% guarantee. It will just be a matter of time before someone plays the odds and that unlikely event of losing money happens.
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