European settlers brought the idea of lotteries to the New World. While the Spanish lottery served as an example for many lotteries in Southern and Central America, lotteries in the North were an immediate outgrowth of English lotteries.
In fact, tickets of the English state lotteries were sold in the colonies. The 1740ies saw a wave of public lotteries in England to finance participation in the war of the Austrian succession. In this context, New York authorized its first public lottery in 1746 to finance fortification of the city. This first lottery was not overly successful. The drawing had to be postponed due to sluggish sales, and even then the treasury ended up buying the remaining tickets. Nevertheless, there was a second lottery at the end of the same year, this time to raise money for founding a college. Several more lotteries were necessary over the following decade to provide sufficient funding for King's College (Columbia). The success of the French in the French and Indian war prompted two lotteries in 1756: one to purchase firearms for people who could not afford them (Citizens had been ordered to arm themselves.), and another one to build a jail for prisoners of war. In 1758, a lottery was held to help the city of Albany repay its wartime debts. In 1761, construction of a lighthouse at Sandy Hook was financed by a lottery, since raising taxes seemed inadvisable, given the heavy burden resulting from the war. The same year a lottery was held to repair New York's city hall.
In 1763, there was a lottery to provide funds for subsidizing the cultivation of hemp, exports of which were hoped to reduce the trade deficit with England. These public lotteries were organized along the following lines. People who were interested in organizing a lottery for a particular public purpose petitioned the legislature, which would then pass a bill containing the full details concerning the lottery, such as method of drawing, names of managers, number of tickets, prizes, etc. After authorization had been granted, daily advertisements were placed in a local newspaper, and the tickets were sold by the managers personally. The money to be raised for the particular public purpose was obtained by explicitly deducting a certain percentage (usually 15 or 12.5 percent) from the prizes. In addition to their own public lotteries, New Yorkers could buy tickets for out-of-state and private lotteries. The wave of public lotteries seems to have spurred private competition.
The legislature responded with ever stricter laws against private lotteries. Already, in 1721, New York had followed suit when England passed a law against private lotteries. In 1747, the fine for private lotteries was set to double the amount of the lottery, one half of which had to be paid to the person who brought suit and the other half to the government. In 1759, an act was passed imposing a fine on the sale of tickets for private lotteries from other colonies, and, in 1772, another act was passed against the custom of disposing of property by means of a lottery. The year 1774 saw still another act instructing prosecutors to press charges and impose additional penalties for participation in private lotteries. During the revolution, two lotteries were held: one in 1780 to finance the purchase of fire buckets for the city, and the second in 1781 for the benefit of needy refugees.
The first lottery-related act after the revolution was aimed at suppressing private lotteries. It iterated the penalties of the law of 1774 but pardoned all offenses that had been committed after 1776. In 1790, a first lottery was authorized to repair the city hall of New York which was intended as the seat of Congress. Five years later, a lottery was held to benefit the poor, and, in 1797, one was authorized to improve certain roads. The beginning of the 19th century saw a wave of public lotteries: a series of lotteries to improve navigation of the Hudson river, four lotteries for the encouragement of literature, the Black River lottery for building a road along this river, a lottery to finance construction of the state capitol, and a series of lotteries for the endowment of Union College. Organizing lotteries had become big business. Managers were required to give bonds to guarantee subsequent payment of prizes but also received commissions ranging from 10 to 15 percent of the amount raised. They no longer sold tickets personally but tended to sell them in bulk to lottery offices. Those lottery offices were a lucrative business. They not only sold tickets at a considerable margin but also offered lottery insurance and let out tickets. Letting out of tickets was possible because drawings lasted for several days, so one could rent a ticket by the day at a fraction of the cost of buying it. Much more important was lottery insurance, which was basically side betting on whether official tickets would obtain a prize or turn out blank. An act was passed in 1807 against lottery insurance and amended in 1809 to cover private lotteries as well. The year 1810 saw the first failure of a lottery manager, which resulted in the state paying prizes at a loss of over 40,000 dollars. Despite these first mishaps there were new lotteries. To promote medical science, a lottery was authorized to provide money for the purchase of a formerly private botanic garden.
Further lotteries were authorized for improving navigation of the Hudson, as well as for educational purposes and road building. With the rising number and volume of lotteries, opposition to them grew. A new law against private lotteries and lottery insurance was passed in 1813.
Nevertheless, there were more lotteries to raise funds for Union College, and older lotteries were still running. After the proprietor of a lottery office, Charles N. Baldwin, accused a manager of the Medical Science lottery of fraud, and was found to be correct, the state assembly ordered an investigation. As a result of this investigation, an act was passed in 1819 which specified detailed regulations regarding lotteries.
The state constitution of 1820 stated that the legislature should not authorize lotteries. In disregard of this, two more lotteries were authorized: one in 1820 to allow the city of Albany to dispose of public land, and the other in 1823 to build a fever hospital in New York. In 1822, acts were passed to facilitate drawings of lotteries, in order to bring the still ongoing ones to an end, and to turn over control of the lotteries to the institutions in whose favor they had been granted. In 1826, a last act was passed raising the penalties for the sale of unauthorized tickets and the forging of tickets. In the meantime, the agents Yates and McIntyre had been charged with the management of all remaining lotteries.
In 1832-33 accusations grew that these agents had sold more tickets than authorized. A settlement between them and the legislature was reached in1833, by which all lotteries had to cease on December 31, 1833.
The History of Lotteries
Gerald Willmann
Department of Economics, Stanford University
Stanford, CA 94305-6072, U.S.A.
gerald@willmann.stanford.edu
August 3, 1999
Gerald Willmann's official site
Taken from www.policygame.net
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