A lottery is a game in which players select groups of numbers and are awarded prizes according to how many of the numbers match a second set that is chosen by random drawing. The prize money varies, but can be as low as three or four of the winning numbers, as high as the jackpot amount, which is generally advertised as a single lump sum payment before taxes. A lottery is generally run by a government and its proceeds are used to fund public projects.

Lotteries are a popular way to raise public funds, but they also carry significant risks for both participants and the government. Some of these risks include the possibility of large amounts of money being won by small groups, the potential for compulsive gambling, and regressive impacts on lower-income populations. Moreover, the business model of lottery operations has often been criticized for its emphasis on profits over the needs of the public.

The first recorded lotteries were held in the Low Countries in the 15th century, with local governments using the games to raise funds for town fortifications and poor relief. A record of a lottery at L’Ecluse, dated 9 May 1445, shows that the winner received 1737 florins (worth about US$170,000 in 2014). The winners were required to choose between a lump-sum payment and an annuity. The annuity option entails a lump-sum payment immediately and 29 annual payments that increase by 5% per year until the last payment is made at age 115.

Despite the risks, lottery games enjoy broad public support in many states. The popularity of state lotteries is often attributed to the belief that proceeds from ticket sales are being used for a specific public good such as education, and are a more appealing alternative to raising tax rates or cutting public programs during periods of economic stress. However, studies show that the actual fiscal condition of a state does not have much impact on whether or when a lottery is adopted.

Because lotteries are run as businesses with an explicit focus on maximizing revenues, they must promote gambling to attract and retain customers. This approach is controversial, as it inevitably promotes the idea that spending money on a lottery ticket is rational, even if the chances of winning are low. Moreover, it may have negative consequences for vulnerable populations including the poor and problem gamblers.

Moreover, lottery advertising often targets specific groups of people such as convenience store operators; vendors who supply the goods and services needed to operate the lottery; teachers in states where a portion of lottery proceeds is earmarked for education; and state legislators, who become accustomed to receiving generous campaign contributions from lottery suppliers and are usually quick to approve new games when revenue pressures arise. As a result, lottery promotions are frequently at cross-purposes with public policy goals. These tensions can be difficult to resolve.