THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
Globe Editorial

Lottery game is fatally flawed; treasurer should shut it down

August 3, 2011

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THE GENERAL rule for the Lottery, as with other forms of organized gambling, is that the house always wins. If it didn’t, the Commonwealth wouldn’t make money off of it. But the odds should be stacked equally against rich and poor. That’s not the case for the flawed Cash WinFall game, which is why Treasurer Steven Grossman needs to discontinue it immediately.

As the Globe reported Sunday, a mathematical quirk in the game’s rules makes it possible, for a few days every year, for players who spend more than $100,000 on tickets to virtually guarantee themselves a profit, even while small-dollar players are still likely to lose.

This loophole has quietly become a cash cow for the handful of players who have figured it out, including a few computer scientists from MIT and Northeastern. In one week in May, three groups of investors accounted for 1,105 of the 1,605 winning Cash WinFall tickets. According to the report by the Globe’s Andrea Estes and Scott Allen, the state has known about these savvy investors banking their risk-free paydays for years, but has allowed the game to go on.

It’s not intrinsically illegal for sophisticated players to exploit the rules. The house is still making money on Cash WinFall on most days - and indeed is making an overall profit on the game.

Yet the game undermines the integrity of a lottery that’s perceived to be a pure game of chance. It also creates a strong temptation for mischief and corruption by lottery agents, who stand to collect huge commissions for selling the thousands of tickets needed to make the scheme work. The state recently suspended two agents’ permission to sell tickets for violations like allowing players to operate machines themselves, or opening stores solely to accommodate high-volume gamblers.

After the Globe story appeared, Grossman limited to $5,000 the amount of WinFall tickets that agents can sell in a day. That’s a step in the right direction, but it doesn’t solve the fundamental problem of a flawed game design. As long as the rules remain, enterprising gamblers could find ways around the daily limit.

Grossman also said the game will be phased out next year, but there’s no reason to wait. Lottery players have a right to expect that the money they spend on tickets goes to cities and towns - not into the pockets of well-heeled investors who’ve found a way to game the system.