More Gaming the Lottery
August 11th, 2011




Galley Friend P.G. found this one:

 Billy’s Beer and Wine sold exactly $47 worth of lottery tickets the day before Marjorie Selbee arrived, just another sleepy day for the liquor store in this tiny Western Massachusetts town. But from the moment the 70-something woman from Michigan entered the store early July 12, Billy’s wasn’t sleepy anymore.

Over the next three days, Selbee bought $307,000 worth of $2 tickets for a relatively obscure game called Cash WinFall, tying up the machine that spits out the pink tickets for hours at a time. Down the road at Jerry’s Place, a coffee shop in South Deerfield, Selbee’s husband, Gerald, was also spending $307,000 on Cash WinFall. Together, the couple bought more than 300,000 tickets for a game whose biggest prize – about $2 million – has been claimed exactly once in the game’s seven-year history.

 But the Selbees, who run a gambling company called GS Investment Strategies, know a secret about the Massachusetts State Lottery: For a few days about every three months, Cash WinFall may be the most reliably lucrative lottery game in the country. Because of a quirk in the rules, when the jackpot reaches roughly $2 million and no one wins, payoffs for smaller prizes swell dramatically, which statisticians say practically assures a profit to anyone who buys at least $100,000 worth of tickets. . . .
There’s more. It’s pretty interesting. Lottery’s have always been a tax on the poor, but that tax has increased as the quants moved in on the games. Makes you wonder if the stock market is basically the same racket these days, now that it’s largely divorced from capital allocation.

  1. WershovenistPig August 11, 2011 at 1:38 pm

    Thanks for sharing this piece.

    There are so many interesting details here:

    1. The Globe publishing and publicizing the game’s flaw should arbitrage away the opportunities for the savvy gamblers who previously exploited the flaw, i.e. if too many people start buying lots of tickets, the odds that someone hits the jackpot grows, negating the benefits of the strategy. The reticence of the gamblers to discuss their trade, because they don’t want a crowded trade here, is understandable.

    2. The names of the gamblers’ “investment firms” are wonderful in their attempts to be vaguely hedge fund-y sounding and serious: Random Strategies Investments, GS Investment Strategies, Tong’s Fortunelot Limited Partnership. Okay, that last one is pretty blatant. It would be like me naming my firm “Pig’s Gluttonous Pile of Filthy Lucre, LLP.”

    3. I love the idea that the mom-and-pop lottery ticket sellers are incentivized with commissions on ticket sales and on winning tickets to help out the gamblers.

    4. I’m also not surprised that the state doesn’t seem to care that there’s a wealth transfer from the poor and stupid to the wealthy and savvy, just so long as the state continues to make a profit and get its cut. Yes, the lottery has done some window-dressing crackdowns on the mom-and-pops for minor violations, but they aren’t really interested in stopping this phenomenon. And hey, this type of publicity will probably increase sales of Cash WinFall tickets in the short term.

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