US lottery jackpots used to never reach $1 billion. They’ve done it 12 times in 5 years

Wednesday evening’s Powerball drawing went and not using a jackpot winner, pushing the highest prize to an estimated $1 billion for Saturday. It’s the second largest of this yr, lagging solely the $1.787 billion Powerball jackpot in September, claimed by two winners in Missouri and Texas.

If it looks as if jackpots have been getting bigger over the previous few years, they’ve. The first US lottery jackpot over $1 billion got here in 2016, when winners in Florida, California and Tennessee cut up a $1.586 billion Powerball prize. The present Powerball jackpot would be the 14th ever US lottery prize of a minimum of $1 billion, and the twelfth since January 2021.

Powerball and Mega Millions, the 2 largest lottery video games in the United States, have been attempting to garner bigger jackpots. Here’s how:

Powerball and Mega Millions ticket costs have crept up over the past 13 years. A portion of gross sales goes to the prize pool, and the jackpot rolls over to subsequent drawings – and grows with extra gross sales – till it is gained. Higher costs naturally lead to larger jackpots.

Powerball tickets rose in value in 2012 from $1 to $2, the place they’ve remained since.

Mega Millions hiked up costs twice in its historical past. In 2017, the sport adopted Powerball in raising prices from $1 to $2, however this yr its tickets jumped to $5. It’s a part of a larger effort that ensures bigger and faster-growing jackpots, according to Mega Millions.

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The odds for profitable the jackpot have at all times been steep, however they’ve gotten deliberately steeper in the final decade.

To win a Powerball jackpot, a ticket holder should match all six drawn balls – 5 white and one crimson. In 2015, Powerball modified its prize odds by growing the quantity vary for its white balls and lowering the vary for the crimson ones.

What that did was enhance the chances of profitable any prize, together with these as little as $4, however worsened the chances of profitable the jackpot from 1 in 175.2 million to 1 in 292.2 million.

“Mathematically, by changing the number of balls you draw and the number of balls you draw from, you can create a lottery with any odds you want, essentially,” Victor Matheson, professor of economics on the College of the Holy Cross, stated Thursday.

Lotteries have used steeper odds as part of a strategy to drive jackpots higher. Jackpots which can be gained much less typically will roll over extra typically.

“Basically, the lottery associations figured out that no one buys a Powerball ticket to win $10. No one buys a Powerball ticket to win $100. They buy a Powerball ticket to become a billionaire,” Matheson stated. “So … more of the money going into large jackpots, which means, again, the jackpot grows more quickly.”

Mega Millions lengthened its odds of a jackpot win in 2017 from 1 in 258.9 million to 1 in 302.6 million. Like Powerball, it did so by altering the ranges of its drawing numbers.

This yr, Mega Millions barely improved the chances of profitable the jackpot to 1 in 290.5 million. But that coincided with the change in ticket value from $2 to $5.

Interest rates additionally affect how massive jackpots are marketed to amass.

There are two ways in which Powerball or Mega Millions jackpot winners can take their payout: an annuitized prize of 30 yearly funds that improve over time, or a right away lump sum.

The jackpot that the lotteries publicize most prominently is the annuitized prize – in Saturday’s case, an estimated $1 billion. For those that desire a lump sum? That is at all times smaller. Saturday’s lump sum is an estimated $457.7 million.

The annuitized plan takes rates of interest into consideration, permitting the lottery affiliation to make investments the cash and promising bigger returns in the longer term, Matheson stated.

And on the entire, rates of interest have been larger in latest years. The Federal Reserve raised its benchmark fee from 2022 to 2023. That has been dropping since final yr, however it still is above where it was in early 2022. Higher rates of interest enable for larger annuitized jackpot prizes.

Lotteries take that annuitized determine and run with it in promoting, regardless of it not being what most individuals select to stroll house with.

“Everyone always takes the (lump sum) cash in Powerball and in Mega Millions,” Matheson stated.

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Expanding the video games almost nationwide

For years, Powerball and Mega Millions had been obtainable solely in completely different units of states, which means folks would have to cross state strains to purchase tickets for sure video games. Only 12 states carried Mega Millions earlier than a 2010 deal between the 2 video games, which allowed taking part states to promote each.

Mega Millions and Powerball at the moment are obtainable in almost all states, in addition to in Washington, DC, and the US Virgin Islands, in accordance to the Multi-State Lottery Association.

But there are some outliers: Alabama, Alaska, Nevada, Hawaii and Utah don’t have lotteries, and Puerto Rico provides Powerball however not Mega Millions.

Letting extra folks play allowed for bigger money prizes to accumulate, and it didn’t take lengthy for this to occur. In 2012, Mega Millions had its biggest jackpot on the time: $656 million, cut up between three winners who purchased tickets in Kansas, Illinois and Maryland.

Saturday’s Powerball drawing will happen at 10:59 p.m. ET.