New research shows lotteries rely on low-income players

A recent report found that state lotteries around the country are supported in large part by people who are least able to afford it. The Howard Center for Investigative Journalism looked at the 45 states that have at least one kind of lottery and found that the retail outlets where lottery games can be played are often in socio-economically disadvantaged neighborhoods. We hear more about how those national findings are reflected in Oregon from the center’s Data Journalist Sean Mussenden.

The following transcript was created by a computer and edited by a volunteer:

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Nationwide, state lottery sales have increased by about 75% since 2005. And it really is nationwide – only five states don’t operate lotteries of some kind. So reporters at the Howard Center for Investigative Journalism, which is based at the University of Maryland, set out to learn more about how these lotteries are operating. They found that retail outlets where lottery games can be played or purchased are disproportionately located in poor neighborhoods and neighborhoods with higher percentages of People of Color. Sean Mussenden is a Data Journalist at the Howard Center. He joins us now to talk about these national findings and the situation in Oregon. Welcome to Think Out Loud.

Sean Mussenden: Thank you. Thanks for having me on.

Miller: Why did your team decide to look into state lotteries in the first place?

Mussenden: We consider the question of where funding for governments to be a really important one. There’s lots of ways that governments raise money from tax revenue. Lotteries are a small but significant portion of funding in every state. They used to be rare – 50 years ago, there were only a handful of states that had them. As you said today, they are in 45 states plus the District of Columbia. And they only don’t exist in about five. It is big money. In 2020 – the latest years for which we had aggregated figures – something like 82 billion dollars were spent on ticket sales for lotteries alone. That doesn’t include things like video lottery, which of course is big in Oregon.

Miller: One of your big questions was the extent to which lotteries around the country rely on poor people to fund the systems. How much data do states actually have about this?

Mussenden: This is surprisingly a very difficult question to answer. Lotteries collect quite a bit of information about their customers. In many ways, they’re more akin to a business in this respect than a government agency. Almost every lottery will conduct – usually with the help of contractors – very detailed market research studies – things called customer segmentation studies – to help learn more about the audience and figure out how to sell more tickets.

In all of that data, a key question we had was: How much do lotteries know, given what they’re collecting about how much people of different demographic, racial, income, and educational groups spend? We put in public records requests to something like 25 lotteries across the country asking for these studies. We got a lot of them back, we look through them. A thing that we found over and over again was that if lotteries collected information on this at all internally, what they were doing was collecting information on the prevalence of play. In this respect, somebody who treats – who plays one – buys one Mega Millions ticket a year is treated as the same as somebody who buys $100 worth of scratch-offs a week or a month.

Given that there’s been some pretty good research that shows that heavy players are overwhelmingly responsible for most of lottery funding, we really wanted to know who was making up these groups. What we were looking for was whether or not lotteries were collecting information on average amount of money spent by members of different demographic groups. While they were collecting things like prevalence of play, they weren’t really collecting – only a handful of states, we found – were doing it that way.

Miller: Why don’t they? Did they give any reasons for not having more granularity in their data?

Mussenden: We posed that question to a number of lotteries. One state – struggling to remember which one it was now – told us that – actually quoted them in one of our stories – that lottery games are available to anybody over a certain age in the state, and so it doesn’t make sense to collect highly segmented information that way. But, that of course runs counter to the fact that many states are collecting things about how whether or not different demographic groups are playing. That was an example of a response we got from one lottery.

Miller: So, the states were not really, in general, able to give you the kind of data you wanted in terms of demographic groups or socioeconomic level and frequency of play. What were you able to learn?

Mussenden: We gathered a tremendous amount of information about advertising campaigns and the systems by which these games are structured. One thing we also collected, as a way of trying to get a sense of where lotteries were operating, is from every state – except for one, South Dakota – we were able to gather the locations of lottery retailers. We were able to do some geographic analysis, looking at the degree to which these stores –  stores that sell tickets – were located in communities of certain demographics.

This isn’t the ideal way, if you’re designing a research study, to be able to answer the question of who plays. Because of the lack of information from other sources, this is another approach to answering some of these questions. We talked to people who knew a lot about lotteries and researchers. A thing we kept saying over and over again was that, where these things are matter.

Miller: Willamette Week here in Portland did some good reporting of their own after your article came out and found that the Multnomah County census tract with the highest number of lottery retailers has a much lower median income than the county as a whole – basically echoing what you found nationally.

But, Willamette Week also included a kind of explanation from a spokesman for the Oregon Lottery, who said that this concentration could be attributed to real estate prices as opposed to targeting poor people. His argument is that it could be more expensive for owners of these retail outlets where the lottery is sold to put them in certain neighborhoods. You’ve crunched a lot of this data. Does that argument hold water that really this is just because of real estate prices?

Mussenden: I’m not sure about the real estate price argument, but certainly the argument that we’ve made, lotteries across the country have made affirmative decisions, and it’s a choice – make no mistake about it – to sell tickets. Many states open it up to anybody – anybody. Any kind of business can sell tickets and there are things you have to get around, with showing certain levels of security at the store and things like that. Most lottery tickets are sold at convenience stores, and most convenience stores are going to be in commercial areas, and commercial areas are going to tend to be lower income.

I guess the thing I would say to that is that a decision on allowing any business to sell tickets is a choice. There’s other ways that you could go about it – one retailer per neighborhood, or limiting neighborhood retailers in certain areas. Lotteries aren’t doing this. Most of them have pretty clear mandates from their legislatures to increase sales year over year because it makes more money available for government programs. That becomes one of the more important things that helps guide business decisions.

Miller: In fact, that is the Oregon Lottery’s mission as well, in its own way. It’s to “operate a lottery with the highest standards of security and integrity to earn maximum profits for the people of Oregon commensurate with the public good.” That last part, it seems like it is – if not in opposition, then it certainly butts up against the first part. Is it possible to do both of those things at once to earn maximum profits for the people of Oregon and be commensurate with the public good?

Mussenden: I recognize the lottery officials, people who run lotteries are in – it’s a difficult thing to have both of those missions – to pay equal attention to both of those missions at the same time. We didn’t really dig into this – our series and there were people who studied this, who have ideas on how it could be, but from our perspective as journalists, we – I would like to know the information. It’s hard to know whether or not some of these trends are happening in places like Oregon if people are not collecting information in a way that would show it. To be able to answer that – answer those questions, I think it would be really helpful to be able to have lotteries collect that kind of information and release it to the public.

Miller: You also published pushback that you and the team got from an industry group called the North American Association of State and Provincial Lotteries. This was about your findings of the concentration of lottery availability in poorer areas. They said that it’s misleading to examine where stores are concentrated because people “don’t always buy their lottery tickets in the neighborhoods where they live. They purchase them on their way to or from work, or while shopping, running errands, or even at the airport.” What’s your response?

Mussenden: I think it is probably unquestionably true that people don’t always buy lottery tickets where they live. It’s hard to know how widespread the phenomenon of not shopping locally is absent data. There were some good national studies from earlier in the century that showed that, for the most part, people were buying locally. We also, as part of our work, used aggregated mobile location data that allowed us to look at the customer basis for a very large sample of lottery retailers and found that, for the most part, their customer bases were local. In order to get out and answer some of these questions, you have to get creative about how you can approach them in absence of data collected by the lotteries.

Miller: And that was based on Geolocation data from cell phones?

Mussenden: That’s right. There was a company called Safe Graph whose data we used and it’s all anonymized. It allows you to see, for a given store, the in aggregate the neighborhoods or census tracts that people are visiting from.

Miller: I’ve heard people call lotteries a “tax on the poor” for decades. That phrase – I think it goes back a long ways. It’s a kind of shorthand for what you’re talking about here. Do you think that you’ve uncovered things that really surprised you?

Mussenden: Yeah, I would say the biggest thing that surprised us – so, just the first response on tax and poor – I think lotteries would say lottery play is entirely voluntary, people don’t have to play. And that’s different from taxes – which I suppose theoretically are voluntary, but if you don’t pay them, they can put you in jail.

Miller: They’re not legally voluntary. Your point is well-taken.

Mussenden: Something – a number of people we talked to on the course of reporting the series – One thing that really surprised me was that lotteries are exempt from Federal Trade Commission Truth in Advertising laws, meaning that they are not legally bound to explain the actual odds of playing the lottery when – we obviously ran a lot of these numbers – for every dollar somebody plays across the country, looking at the system as a whole, players are going to lose 35 cents, will get back 65 cents in winning, they’ll lose 35 cents. But, lotteries are not required to disclose this information. I think it’s worth thinking about the voluntariness of the lottery in context to what advertising – what lottery advertising is required to say.

Miller: In Oregon Lottery revenues – I should note that video lottery revenues are a gigantic piece of this – ten billion dollars in gross receipts from video lotteries. Scratch-its tickets, for example, are 150 million. So, the difference between billions there and millions there. How – and lottery money in Oregon, it’s the second highest form of revenue after income tax. It helps pay for schools, and parks, and veteran services, and outdoor school, construction bonds. What does this reliance on revenue mean in terms of – nationwide, in terms of lawmakers ability or inclination to reduce that revenue.

Mussenden: In most states, it’s a small proportion of the budget, but it’s an important portion. Most lottery funds are dedicated to schools and you – if you’re a lawmaker, it’s hard to think about how you might replace that money. Lotteries, in some ways, to lawmakers over the years – there’s been a lot of research on this – are more palatable than raising taxes. It can be hard, I think for people to think – for some lawmakers to think about doing anything that would affect that. If you limited lottery advertising, like some states have done, and revenues go down, that’s less money that’s coming into the system.

Miller: What do you most hope that your reporting will lead to?

Mussenden: I always want more information. I’m always in favor of more disclosure. A thing that I would love to see out of that is just more information being produced about who lottery customers are – whether that’s private groups who are looking to study this issue in more depth, or at state lotteries who are gathering and then releasing that information. It may be in some of the states where we’ve looked at. It’s exactly not the case, that there’s an inequity in it, but it’d be nice to know.

Miller: Sean Mussenden, thanks very much.

Mussenden: Thanks for having me.

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