A lottery is a game in which a prize (typically money) is offered to a number of people, who have paid an entry fee. Prizes are awarded by random selection. The lottery is widely used as a method of raising funds for various purposes, and its popularity as a means to raise money has made it one of the world’s most widespread forms of gambling. There are many different kinds of lotteries, including those that award prizes for military conscription and commercial promotions where property is given away by a random procedure.
The first recorded lotteries to offer tickets with prizes in the form of money were held in the Low Countries in the 15th century. They were intended to raise funds for building town fortifications and helping the poor. The lottery name is probably derived from Middle Dutch loterie, a contraction of lot meaning “fate, destiny,” or possibly from Frankish *lotto, from *lotu, “share, prize, reward” (compare Old English and Old Frisian lot, lotta).
In modern lotteries, the total value of prizes is normally the amount that remains after expenses–usually profits for the promoter and costs of promotion–and taxes or other revenues are deducted. The balance is divided into a fixed percentage for the profit or revenue, and the remainder goes to winners. It is usually considered unethical for a promoter to deduct more than this from the pool. Hence, it is not uncommon for a lottery to have both a small number of large prizes and many smaller ones.
Besides offering money as prizes, some lotteries award other goods or services. Examples include subsidized housing units, kindergarten placements, and sporting event draft picks. The latter is perhaps best known, as it occurs in the National Basketball Association each year and determines the order in which the 14 teams that did not make the playoffs will select their top draft picks for next season.
Each state has laws regulating the lottery. These laws may delegate some or all lottery administration to a lottery board or commission. These organizations will typically select and license retailers, train employees to use lottery terminals, help them promote the lottery, redeem winning tickets, pay high-tier prizes, and ensure that everyone abides by the rules of the lottery. They may also be responsible for ensuring that lottery games are honest, and that the results are accurate. In addition, these agencies will monitor and investigate complaints regarding the lottery. They may also set aside a portion of the proceeds for law enforcement and education. In the United States, lottery winnings can be paid as a lump sum or an annuity. The annuity option is preferable for most winners because it avoids income taxation. However, a winning annuity is often worth significantly less than the advertised jackpot, because of the time value of money.