On Friday, an estimated $1.35 billion Mega Millions jackpot will be awarded, the latest in a string of record-breaking lottery prizes in the United States in recent years.
If someone beats the 1 in 302.6 million odds and wins the jackpot on Friday, it will be the second-largest prize in Mega Millions history and the fourth-largest in US lottery history.
You are correct if you believe you heard about another record-breaking jackpot in the not-too-distant past. A $1.337 billion Mega Millions jackpot was won in Illinois in late July, and a $2.04 billion Powerball prize was won in California last November, making it the largest lottery jackpot ever seen in the United States.
And if the estimated $1.35 billion jackpot is won on Friday, six of the top ten U.S. lottery prizes will have been won since 2021 alone.
Can economics explain the increase in these massive jackpots? Is it because more people are buying lottery tickets? Or changes to lottery game rules? Here are some expert opinions:
Why are lottery jackpots increasing in size?
Experts believe that changes in how games like Mega Millions are played a few years ago are one reason we’re seeing bigger lottery prizes today.
“These larger jackpots are on purpose,” Jadrian Wooten, collegiate associate professor of economics at Virginia Tech, told USA TODAY in an email.
In 2017, Mega Millions was significantly redesigned. Ticket prices were raised from $1 to $2, and the chances of winning the jackpot were reduced as more numbers were drawn, resulting in larger jackpots, according to Wooten.
“Some people may have played less because of the higher ticket prices, but others may have jumped in since the introduction of more’smaller’ prizes as well,” Wooten said, referring to the jackpot-probability change.
“Before 2017, the first five numbers were drawn from 1 to 75, and the Mega Ball was drawn from 1 to 15,” Wooten explained.
“After the change, they reduced the first five numbers to 1 through 70, but increased the number of Mega Balls to 25,” he explained, noting that the chances of winning the Mega Millions jackpot dropped from one in 258.9 million to one in 302.6 million.
“As the chances of winning the jackpot fall, weekly ticket revenue rises, resulting in a larger jackpot.”
Powerball and Mega Millions jackpots are increasing, but your chances of winning are ‘outrageously unlikely.’
Mega Millions followed Powerball, which had similar changes implemented in 2015. As of today, all of the top ten United States lottery prizes have been won between 2016 and 2022.
Federal funds rate increases, inflation
Wooten and others also point to Federal Reserve increases in the federal funds rate, which have an impact on the annuity option for each jackpot.
The annuity option has the highest estimated jackpot. For example, in Friday’s Mega Millions drawing, the estimated $1.35 billion jackpot would be distributed only to a winner who chose an annuity paid over 29 years.
Most previous winners chose a cash payout, which is expected to be $707.9 million on Friday.
However, if someone chooses the annuity option and interest rates are high when the jackpot is won, “those annuities will pay out a larger amount over time,” Just explained.
“When interest rates are high, it takes less money today to provide a large payment in the future,” said Matthew Kovach, an assistant professor of economics at Virginia Tech.
Inflation “doesn’t directly” raise the value of a jackpot, according to Kovach, but it “might impact it.” In addition to interest rates rising to combat inflation, Kovach cites rising prices for other products. Meanwhile, Mega Millions lottery tickets have remained unchanged since 2017.
“While it may appear to be a ‘cheap’ way to have fun, it increases sales and thus increases the jackpot,” he explained.
What motivates people to purchase lottery tickets?
According to experts, not everyone enters the lottery for the same reasons.
“Many (purchase lottery tickets) for the thrill of playing and the fun of imagining what they might do with the winnings,” Kovach said. “Others may do it because they are struggling or want to believe in hope.”
Just mentions socioeconomic factors and trends.
People with lower incomes or who have recently experienced financial difficulties who enter the lottery “tend to play at a higher rate; they’re not necessarily spending more dollars on tickets, but they’re spending a higher percentage of their dollars on tickets,” according to Just. “There’s evidence in that group that they’re not playing for fun; they’re playing because they really hope to win… (in hopes) of having some sort of astronomical wealth, or even reasonable wealth.”
Other experts have argued that lotteries are regressive. Researchers have pointed out how poorer communities, as well as people of colour, are particularly targeted.
Kovach observes that there is “mixed evidence” about the impact of economic conditions on lottery sales. During the Great Recession of 2008, for example, sales fell. Meanwhile, he claims that some studies show a “slight increase” in sales as unemployment rises.
High lottery jackpots, such as Friday’s estimated $1.35 billion Mega Millions jackpot, also draw a large number of players.
“People definitely buy more tickets more frequently as jackpots increase in size, which is consistent with basic economics,” Wooten said.
He explains that because the odds of winning are so low, the potential lottery prize “needs to be really large” in order to outweigh the cost. Others get excited about playing for fun and the possibility of “what if?”
Richard Wheeler, president of lottery app Mido Lotto who previously oversaw lottery operations across multiple states, notes that participation becomes “genuinely exponential” as jackpots grow as giant as Friday’s. “At this point, sales tend to double every few days.
Although the odds of winning the jackpot remain extremely low (1 in 302.6 million), Wheeler predicts that a big winner could be announced as soon as Friday or Tuesday’s drawings because “so many more people play.”
Is it worth the risk for a $2 ticket?
Obviously, there is some debate about whether purchasing a $2 Mega Millions or Powerball ticket is “worth” it, especially given the odds of winning the jackpot.
“Imagine you write the letters to ‘Mega Millions’ on separate pieces of paper, mix them up, and let your cat choose letters at random. “Your cat is five times more likely to spell ‘Mega Millions’ correctly than you are to win,” Kovach said, adding that you are also more likely to be struck by lightning twice in your lifetime than to win the lottery.
Entering the lottery is “definitely not a good investment,” according to Kovach, but buying a $2 lottery ticket can be a “cheap way to have some fun,” as long as you stay within your budget.
“It’s critical to recognise that these things make us happy, and happiness is worth a few dollars if we can afford it. “It’s all about balance,” Wooten added.
Meanwhile, Just encourages people to look for other ways to invest the money they would have spent on the lottery, even if it is in small amounts.
“Essentially, lottery promoters are deceiving you in some way. “They’re short-circuiting the way you make risk decisions in order to get you to buy their tickets,” Just explained.
“If you can spare that $2 on a regular basis, you can save and invest – and invest in things that are actually going to be useful for that rainy day that you face in the future,” he added, suggesting options for putting money in savings or accounts that pay interest over time.