A lottery is a game of chance or skill wherein participants pay a small amount to be given the opportunity to win a larger prize. Lottery prizes can be cash, goods, services, or even real estate. A modern example is a scratch-off ticket, which is purchased for $1 or less, and the player hopes to match one of the winning combinations on the back of the ticket to the numbers printed on its front. Other types of lotteries include pull-tab tickets, where numbers are hidden behind a perforated paper tab that must be broken open to see them; and bingo.

The earliest recorded lotteries were town-wide events to raise funds for building walls and town fortifications in the Low Countries of the 15th century, but evidence of earlier practices is scant. In general, however, people have always liked to gamble, and lottery play can be an appealing alternative to risky activities like illegal gambling or over-extended credit.

State governments have used lottery revenues to finance a wide range of projects and programs. In the immediate post-World War II period, many states viewed their lotteries as a source of new money that would allow them to expand social safety nets without imposing onerous taxes on the middle and working classes. This arrangement lasted until the 1960s, when state revenue began to decline due to inflation and the costs of the Vietnam War.

Once state lotteries become established, debate and criticism tends to shift away from the desirability of the lottery to specific features of its operations, such as its alleged regressive impact on poorer communities. Some of this criticism is motivated by concerns about compulsive gambling and other behavioral disorders, but much of it is simply a reaction to, or an attempt to shape, the way in which the lottery functions.

Generally, a lottery requires some means of recording the identities and amounts staked by bettors; a system for pooling and determining winners from this information; a procedure for determining the frequency and size of prizes; and a policy regarding whether to have a few large prizes or many smaller ones. A substantial percentage of the total money bet is typically earmarked for administrative costs and profits to the lottery organizers.

Lotteries also attract critics because of their perceived regressive effect on lower-income communities, especially the urban poor. Although there is some truth to this argument, it ignores the fact that a significant portion of lottery revenues are earmarked for education and other public purposes. Also, lower-income communities do not avoid playing the lottery altogether; they simply play at lower rates than their wealthier neighbors.