Selling the dream, state lottery boards make $128 in sales for ever $1 spent on ads, data shows

HOUSTON (AP) — The sign at the SHOP N Go front counter says “WE SOLD $10,000 WINNER!!”

Located in a Hispanic neighborhood, the store sells Texas Loteria, a popular game marketed by the state lottery that resembles the iconic bingo lotería game in Mexico.

The sign and the game attract players like Manuel Constancia, who said he buys the lottery scratch tickets at SHOP N Go almost every day.

The 50-year-old landscape worker had just bought five $5 Texas Loteria tickets but said he did not win anything. He said he often buys the $50 tickets and has lost enough to come up short on rent and food “many times.”

Yet he keeps coming back.

“I feel that in the next ticket I can become a millionaire,” he said.

State lotteries spend more than a half-billion dollars a year on pervasive marketing campaigns that deliver a similarly hopeful message, designed to persuade people to play often, spend more and overlook the long odds of winning.

A Texas Lottery internet ad tells players they can “unleash the power of luck” by purchasing $20 scratch tickets.

A sign outside a supermarket in New Jersey beckons passersby to “Give Your Dreams A Chance.”

A YouTube video reminds Virginia players they can win more if they wager more.

A phone app in Michigan sends alerts “reminding you to purchase tickets before the draw.”

The investment has paid off for the lotteries. For every $1 spent on advertising nationwide, they have made about $128 in ticket sales, according to an analysis of lottery data by the Howard Center for Investigative Journalism at the University of Maryland.

But behind that success are millions of people like Constancia. For every dollar players spend on the lottery, they will lose about 35 cents on average, the data shows. For many, the losses add up to thousands, even tens of thousands, of dollars over time.

That’s not a statistic the lotteries advertise, and they don’t have to. As state agencies, they are exempt from Federal Trade Commission regulations that prohibit misleading and deceptive advertising.

“The FTC does not regulate state lotteries because they are regulated at the state level, but the most important part is that we do not regulate them because they are not interstate commerce,” a commission spokesperson said.

That leaves oversight of advertising up to the state legislatures that depend on lottery revenue to help balance their budgets.

The conflict of interest has hindered efforts to rein in advertising, such as a 2020 bill that a South Dakota legislator introduced to ban lotteries from promoting their games over concerns they were addictive. It failed to get out of committee after a state official testified it would reduce the flow of lottery money for education spending by $1 million.

“It troubles me how the state promotes gambling while at the same time running ads warning people about opioids, meth, tobacco and every other addictive habit people may be susceptible to,” state Rep. John Mills, a Republican who sponsored the bill, wrote in an email.

Government reliance on gambling funds also puts pressure on lotteries to pursue “new marketing, glossier colors on the scratch tickets, whatever it may be to get people to keep coming, because otherwise the numbers go down,” said Les Bernal, national director of Stop Predatory Gambling, a nonprofit advocacy group based in Washington, D.C.

The impact of the aggressive marketing is especially profound on lower-income Black and Hispanic populations. Studies have found they spend more on lottery games than other groups.

The Howard Center found that stores in the vast majority of the states that sell lottery tickets – 45 states, plus Washington, D.C., have lotteries – are disproportionately concentrated in communities with lower levels of education and income and higher poverty rates, with larger populations of Black and Hispanic people.

“They prey on people’s hopes,” said David Surdam, professor of economics at the University of Northern Iowa. “They figure their chances of ever having real prosperity are pretty slender and the lottery may be the only hope they have.”

Lottery agencies can point to “play responsibly” messages and winning odds disclosures in their ads and on their websites.

But most of the participants in a 2021 study at the University of Memphis had trouble finding or remembering the odds-of-winning statements on scratch-off tickets and only 20% interpreted them correctly.

Another 2021 study, by researchers from the Center for Gambling Studies at Rutgers University, found that most lottery websites admonished players to gamble responsibly but information on what that means was “inconsistent and sparse.”

The Howard Center analyzed annual reports, advertising campaigns and state lottery marketing plans obtained through public records requests and found they frequently promote the risky behavior that their responsible gambling messages discourage.

In the most recent annual report available on its website, the Connecticut Lottery touted its ad campaign urging players to use their common sense.

One of the campaign ads, “Myths,” shows someone circling the 15 on a calendar with “birthday” inscribed below it and then filling in 15 on a lottery ticket. A ball with the number 39 drops in the next frame, followed by a written message: “Using special numbers doesn’t change your odds. Avoid common gambling myths.” The eight-second spot had fewer than 100 views as of early May.

The video appears on the Connecticut Lottery’s YouTube channel along with “Indelible Numbers,” a 30-second video that sends the opposite message. That ad follows a couple from their meeting, marriage, first home and their child’s birth. Through the commercial, numbers are pulled from those meaningful events to form a group of five numbers they use to fill out a Cash 5 lottery slip.

“They’re not just any numbers, they’re your numbers. Play them today, and every day,” the narrator says.

That video had more than 3,700 views.

A tiny “Play responsibly” link at the bottom of the Virginia Lottery website leads to this statement: “At the Virginia Lottery, we encourage friendly competition and responsible play. We are committed to presenting all Virginia Lottery products in the most responsible and ethical manner.”

But a Virginia Lottery ad on its YouTube channel encourages players to play Cash Pop, “an exciting new game,” five times a day with separate drawings at “coffee break,” “lunch break,” “rush hour,” “prime time” and “after hours.”

The video goes on to show how players can bet up to $10 per number and up to 15 numbers per drawing. It fails to mention the cost of following those suggestions would add up to $750 a day.

The odds of winning the $2,500 top prize, “1 in 15,000,” appear briefly in small type on the last frame.

Lottery advertising plans also show that online lotteries are giving state lotteries the ability to track players and target them more directly.

The 2019 Michigan Lottery marketing plan details how use of device-level data allowed tailoring of push notifications to “increase engagement and improve player retention with a seamless experience by delivering the right message, at the right time on the right platform.”

“Whether it be app download, app open, message open, location update, shopping cart abandonment, or app uninstall, having the ability to respond to player behavior at this level will ensure better acquisition and retention,” the plan says.

The marketing plan includes development of a ChatBot that reaches customers through artificial intelligence-based conversations as “a pivotal next step to increase player engagement.”

Officials at the Michigan, Virginia, Connecticut, New Jersey and Texas lotteries contacted for this story did not respond or declined to discuss their marketing campaigns. David Gale, executive director of the North American Association of State and Provincial Lotteries, referred questions about industry practices to the state lottery agencies.

Opponents of the Texas lottery won a provision in the 1991 law that created the lottery, banning advertisements or promotions “of a nature that unduly influences any person to purchase a lottery ticket.”

But efforts to enforce it have faltered. A bill to prohibit the lottery from advertising in counties with a per-capita income below 150% of the poverty line and another to ensure advertising didn’t target any specific demographic both failed.

The Howard Center’s analysis, based on 2020 data, found that census tracts in Texas with lottery retailers, like the one where Constancia buys his tickets, had larger Hispanic populations and higher poverty levels. And the lottery’s own 2020 study found Hispanic players outspent players belonging to any other demographic group on lottery games by 30%.

The Texas Lottery Commission, the agency that oversees the lottery, has adopted some safeguards. Its advertising “sensitivity” policies require marketing agencies to design campaigns that do not “exploit a person, specific group or economic class.”

Yet the commision has made its scratch-off Texas Loteria games the centerpiece of a four-year, $3 million marketing campaign to boost its brand and sales with a special emphasis on “ethnic markets,” according to documents obtained through a records request.

The lottery originally introduced them as $3, $5 and $10 scratch offs. But beginning in 2018, it added two $20 Loteria games and most recently, a $50 version — one of the most expensive games in the Texas market today.

LatinWorks Marketing LLC, a firm specializing in ad campaigns that tap into the growing Hispanic market, won the contract to promote sales. The company, now called Third Ear, proposed hiring a Hispanic and a non-Hispanic influencer to get around ad blockers and reach both groups.

In year one of the campaign, sales of Million Dollar Loteria, Mega Loteria and Super Loteria scratch-off tickets topped $540 million, contributing to a record $4.85 billion in scratch-off ticket sales, according to a 2021 Texas Lottery report.

In an email, a spokesperson said the “Texas Lottery declines to participate in this project, either by conducting an interview or answering written questions.”

Vanessa Sánchez Pulla reported from Texas and Virginia. Shannon Clark reported from Maryland. Victoria Ifatusin reported from Texas. Zoe Pierce reported from Connecticut. Shreya Vuttaluru, Rachel Logan and Aadit Tambe did data reporting from Maryland. Katherine Seltzer, Alexandra Macia, Trisha Ahmed, Abigail Zimmardi and Lauren Mowry contributed.

The Howard Center at the University of Maryland is funded by a grant from the Scripps Howard Foundation in honor of newspaper pioneer Roy W. Howard.

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