Lottery is a form of gambling in which players purchase tickets and hope that their numbers match those drawn by a machine. The prize money can be cash, merchandise or services. In the United States, state governments sponsor most lotteries. Some countries have national or regional lotteries. The modern lottery began in New Hampshire in 1964 and has spread to most states and the District of Columbia. Unlike other forms of gambling, the proceeds from the lottery are earmarked for public purposes, typically education. Because of this, lotteries have widespread support among voters and politicians.

Lotteries were frequently used in colonial-era America to finance projects such as paving streets and constructing wharves, and George Washington sponsored a lottery to help establish the University of Virginia. In the 18th century, lotteries financed construction of buildings at Harvard and Yale.

A large percentage of lottery players come from middle-income neighborhoods, and far fewer people from low-income communities participate in the games. This is consistent with the theory that lottery players are rational and value the chance to win a substantial sum over the chance of winning nothing.

As with all types of gambling, the lottery has its drawbacks. The major problem is that revenues grow dramatically for a period of years, then level off and eventually decline. This has prompted lotteries to innovate, offering new games and promotional campaigns. The second problem is that lottery profits are often subject to substantial income tax withholdings. This reduces the actual size of the prizes that are paid out. In addition, winners are required to choose whether to receive their prize in a lump sum or annuity payments. The former option tends to generate more immediate wealth, but also creates problems such as spending and gambling addiction.