Jackpot fever is sweeping America.
On June 20, Bernadette Geitka, a Mega Millions lottery player in Baltimore, picked a collection of numbers worth as much as $183 million. Yesterday, the rival Powerball game held its semi-weekly drawing, whose top prize had an estimated value of $165 million.
Taken together, those payouts equal more than $300 million -- and provide further evidence of the biggest trend in lotteries since states began to legalize numbers games in the 1960s.
These days, prizes have grown so gargantuan that anything less than $100 million looks like chump change.
"Jackpots have definitely increased tremendously," says Jimmy White, a spokesman for the Maryland Lottery. The reason: The emergence over the last decade of the multi-state game.
"When each state had only its own jackpot game, the biggest prizes were in the range of $5 [million] or $10 million," White notes. "Then along came games in which jackpots are fueled by the sales of tickets in many states."
Sadly, though, there's a yin to the jackpot yang. While payouts have expanded, the chances of winning have shrunk. According to White, the odds on a big, single-state sweepstakes are about 6 million to 1.
Bernadette Geitka overcame odds of about 135 million to 1.
Jackpot fatigue
As any gambler knows, the house is always the biggest winner. So it's no surprise that states have taken to lotteries like white on rice.
About 51 percent of Americans buy at least one lottery ticket every year, according to the North American Association of State and Provincial Lotteries. What's more, the big payouts are drawing new players.
"People who would never buy otherwise decide they might as well get in the game," White says.
Super sweepstakes
The biggest individual sweepstakes prizes to date. A $363 million Mega Millions prize was shared by two winners.
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Location | |
Date | |
Amount | |
West Virginia | 12/25/02 | $315 million | |
Indiana | 7/29/98 | $296 million | |
Massachusetts | 4/6/99 | $197 million | | | Wisconsin | 5/20/99 | $195 million | | | New Jersey | 7/16/02 | $165 million |
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| Source: Multi-state Lottery Association | |
That's good news for the two consortia running multi-state games. Powerball, based in Iowa, was formed in 1988 and is played in 24 states, plus Washington, D.C. and the U.S. Virgin Islands. Mega Millions, launched in 1995 as the Big Game, has 10 states in its consortium.
Both multi-state games offer a minimum prize of $10 million, and both pay out approximately 50 percent of their revenue to winners. As each consortium grows, obviously, revenue and payout potential rise commensurately.
Up until now, state lottery commissions have had to choose one or the other. Powerball states tend to be smaller (although California is a member). Mega Millions boasts more populous states, including New York, Illinois and Massachusetts.
With only a few unaffiliated states remaining, a new possibility has emerged amid competition to sign up one of the biggest prizes still out there: Texas.
The Lone Star State is in the process of considering whether to join up with Mega Millions or Powerball's Multi-state Lottery Association. On Monday, however, Texas Lottery Commission head Tom Clowe made a provocative suggestion: Why not join both?
According to the Austin American-Statesman, Clowe made the proposal to officials from each consortia. "It's something we ought to really, seriously think about," the paper quoted Clowe as saying.
Such a move would be extraordinary, but both sides pledged to consider the notion.
Take the cash
At an afternoon press conference Wednesday, Gietka, 54, was revealed as the winner of the Mega Millions sweepstakes.
She opted to receive a lump sum payout of $112 million, rather than the larger prize of $183 million, which would have been an annuity paid out in 26 annual increments.
"Almost everyone takes the up-front payment," says Joe Maloney, a spokesman for the Multi-State Lottery Association, which oversees the Powerball game.
It's the same with Mega Millions. "The vast majority go for the cash," White says.
Maloney argues that the annuity is a better choice, at least in the hypothetical.
"If you were to win $100 million, the cash option might be about $59 million," he estimates. "Taxes get taken out right away, so you start with just over $40 million. There's no way you're going to get a high enough annual return every year to build that up to $100 million over the life of the annuity."
For his part, though, White understands why someone would choose the lump sum payment.
"We never tell people what to do," he says, noting that his business is doling out money, not financial advice. "But most winners would say it's a no-brainer to go for the cash."
In the case of the Baltimore Mega Millions winner, a $112 million pre-tax payment will net out to $76 million after the government takes its cut.
"That's enough money to really change your life," White says, in an eight-digit understatement.
By Gordon T. Anderson, CNN/Money Contributing Writer
