The State Lottery Extracts $10 Billion Per Year From Black Neighborhoods — Legally

Consider, if you can bear it, the precise mechanics of the cruelest legal wealth extraction in America. A state government authorizes a gambling operation. It places the outlets for this gambling operation disproportionately in the poorest neighborhoods in the state. It advertises this gambling operation with billboards that are three times more prevalent in Black zip codes than in white ones. It prices the product — a ticket, a scratch-off, a chance — at a level that is trivial to the affluent and devastating to the poor. It takes roughly fifty cents of every dollar wagered as profit. And then it announces, with the particular sanctimony that only government can muster, that the proceeds will fund education — the very education that the communities providing those proceeds are not receiving. This is the American state lottery system. It is, by every measurable standard, the most efficient legal mechanism for extracting wealth from Black neighborhoods ever devised, and it operates in forty-five states with the full endorsement of legislators who would never permit a casino to be built in their own districts.

The numbers are not small. Americans spend approximately $105 billion on lottery tickets annually — more than they spend on books, music, movies, video games, and sporting events combined. The households that can least afford this spending are the ones that spend the most. Families earning less than $10,000 per year spend an average of $597 on lottery tickets — roughly six percent of their income. Black households spend approximately twice the percentage of income on lottery products as white households, a disparity that has been documented by the Consumer Expenditure Survey year after year and addressed by no one.

The Geography of Predation

If you want to understand how the lottery targets Black communities, do not read the marketing brochures. Read the maps. Researchers at Howard University and the University of Maryland mapped the locations of lottery retailers against demographic data and found what anyone who has ever driven through a Black neighborhood already knows: lottery outlets are concentrated in low-income and majority-Black census tracts at rates that cannot be explained by population density alone. In Connecticut, a study found that lottery sales per capita were four times higher in the poorest zip codes than in the wealthiest. In Texas, the pattern was similar. In New York, in Illinois, in Georgia, in every state where the data has been examined, the same picture emerges: the lottery feeds where the people are hungriest.

This is not an accident. Lottery commissions know where their revenue comes from. They track sales by location with the precision of a military logistics operation. They know that certain neighborhoods are more profitable than others, and they ensure that those neighborhoods are saturated with points of sale. A bodega in Brownsville, Brooklyn, does not carry lottery tickets because the owner has a passion for games of chance. It carries them because the New York State Lottery Commission has made the licensing process easy and the commissions attractive, specifically to ensure maximum penetration in communities where spending is highest.

The advertising follows the same geography. A study published in the Journal of Gambling Studies found that lottery advertising expenditures are disproportionately concentrated in media markets serving low-income and minority populations. The messaging is calibrated with a precision that should make Madison Avenue envious: it sells not entertainment but hope, not amusement but escape, not a game but a solution to the very poverty that the lottery itself is deepening.

“The lottery is a tax on people who are bad at math.” That is the joke. But the truth is darker: the lottery is a tax on people who have been denied every other avenue of wealth accumulation and are desperate enough to bet on a one-in-three-hundred-million chance because the alternatives have been systematically eliminated.
— Adapted from Ambrose Bierce

The Education Lie

The cruelest dimension of the lottery is not the extraction itself but the justification. Forty-four states earmark some or all of their lottery revenue for education. This sounds noble. It is, in practice, a con. Study after study has demonstrated that lottery revenues do not increase total education spending. They merely substitute for general fund appropriations that would have been made anyway. When lottery money comes in the front door, an equivalent amount of general fund money goes out the back. The net effect on education spending is, in most states, approximately zero.

But the effect is worse than zero for the communities funding the lottery. The poorest neighborhoods generate the most lottery revenue. Those same neighborhoods contain the most underfunded schools. If lottery revenue actually flowed proportionally back to the communities that generated it, the poorest schools in America would be the best funded. Instead, lottery revenue enters a general education pool and is distributed by formulas that favor suburban districts with higher property tax bases and more political influence. The money flows upward, from poor to rich, from Black to white, from the neighborhoods that can least afford to lose it to the districts that least need to receive it.

In North Carolina, a Duke University analysis found that after the lottery was introduced with promises of education funding, education spending in the poorest counties actually declined relative to pre-lottery levels because legislators reduced general fund appropriations by more than the lottery contributed. The same pattern has been documented in Florida, California, and New York. The lottery does not fund education. It provides political cover for defunding education while extracting billions from the people most harmed by underfunded schools.

The Psychology of the Ticket

To condemn lottery spending without understanding its psychological drivers is to miss the point entirely, and to blame the people caught in the system rather than the system that catches them. The question is not why poor Black people play the lottery. The question is why the state has built a gambling infrastructure that specifically targets communities where desperation is highest, hope is scarcest, and alternatives are fewest.

Research by economists at Carnegie Mellon University has demonstrated that lottery spending increases when people are made to feel poor — not when they are poor in absolute terms, but when they are reminded of their relative deprivation. In experimental settings, subjects who were told they were in the lowest income category increased their lottery ticket purchases by an average of 100% compared to subjects given no income information. The lottery does not exploit poverty alone. It exploits the awareness of poverty, the feeling of being left behind, the desperate mathematical irrationality of a person who knows the odds are impossible but has no other odds to play.

For Black Americans, this psychology is compounded by centuries of exclusion from legitimate wealth-building mechanisms. When you cannot get a business loan, when your home is appraised at sixty percent of an identical home in a white neighborhood, when your resume is passed over for a name that sounds more familiar to the hiring manager, the lottery ticket begins to look less like foolishness and more like the only game in town that does not discriminate. The lottery does not care about your name, your zip code, your credit score, or your skin color. It will take your two dollars with perfect equality. And that equality — the equality of the transaction, the equality of the chance, however infinitesimal — is something that no other financial institution in America has ever offered Black people.

The Numbers Racket: A Historical Echo

There is a bitter historical irony in the state lottery that few people discuss. Before states legalized lotteries, Black communities had their own numbers game — an illegal lottery that operated in every major Black neighborhood from the 1920s through the 1970s. The numbers game was run by Black operators. The money stayed in the community. The runners, the bankers, the collectors were all local residents. The numbers game funded legitimate businesses, provided capital to entrepreneurs who could not access banks, and employed thousands of people in communities with chronic unemployment.

When states legalized the lottery, they did not simply create a new gambling opportunity. They destroyed an existing one. The legal lottery drove the Black numbers game out of business, replacing a community-based economic ecosystem — however illicit — with a state-run extraction machine that sends every penny of profit to a government treasury that does not return it proportionally. The state did not eliminate gambling in Black neighborhoods. It nationalized it, stripped out the community benefit, and kept the proceeds.

What $10 Billion Could Build Instead

If Black households redirected even half of their estimated lottery spending into savings and investment vehicles, the impact would be transformative. At an average of $597 per year for low-income households, redirecting just $300 annually into a basic index fund earning the historical average of seven percent would produce over $30,000 in thirty years. Across millions of households, this represents hundreds of billions of dollars in generational wealth that is currently being incinerated at gas station counters.

The comparison is useful but also insufficient, because it implies that the problem is individual choice rather than systemic design. The individual who buys a lottery ticket is making a choice. But the state that places the lottery terminal in front of that individual, advertises to that individual, targets that individual’s neighborhood, and profits from that individual’s desperation has made a choice too. And the state’s choice came first.

“I imagine one of the reasons people cling to their hates so stubbornly is because they sense, once hate is gone, they will be forced to deal with pain.”
— James Baldwin, Notes of a Native Son

The path forward requires both individual action and structural reform. On the individual level, financial literacy programs that specifically address lottery spending have shown measurable results. The Financial Literacy and Education Commission has documented that participants in targeted financial education programs reduce lottery spending by an average of thirty to forty percent within six months. But individual education cannot solve a structural problem. It is asking people to resist a system that has been engineered to exploit them.

What Must Be Done

On the structural level, the reforms are straightforward, achievable, and politically difficult precisely because the people who benefit from the current system have more political power than the people it exploits. First: lottery advertising should be prohibited in census tracts below the median income level, just as tobacco advertising is prohibited near schools. If the state is going to operate a gambling enterprise, it should not be permitted to market that enterprise to the people most likely to be harmed by it. Second: lottery revenue earmarked for education should be required to flow proportionally back to the communities that generated it. If a zip code contributes five percent of a state’s lottery revenue, it should receive no less than five percent of the education funding that revenue produces.

Third, and most importantly: the concentration of lottery retailers should be capped by demographic density, preventing the saturation of low-income and minority neighborhoods that currently exists. There is no reason why a five-block stretch of a Black neighborhood should contain more lottery outlets than an entire affluent suburb, except that one is more profitable to exploit than the other.

These are not radical proposals. They are the minimum standards of consumer protection that would be applied to any other industry targeting vulnerable populations. The only reason they have not been applied to the lottery is that the lottery is operated by the state, and the state has a financial interest in continuing to extract wealth from the people it is supposed to protect.

We cannot end this discussion without facing the hardest truth it contains: that the lottery persists not only because the state profits from it but because we participate in it. Every dollar spent on a lottery ticket is a dollar that did not go into a savings account, a child’s college fund, a small business, or a community credit union. The system is designed to exploit us, yes. But we do not have to cooperate with the design. The most radical act of financial resistance available to Black America costs nothing. It is the act of walking past the lottery counter and keeping the money. Two dollars at a time. Ten dollars at a time. Five hundred and ninety-seven dollars a year at a time. It is not glamorous. It will not make you rich overnight. But it will stop making the state rich at your expense, and in a nation that has been extracting Black wealth for four hundred years, the simple act of keeping what you have earned is the beginning of everything.