Lottery is a form of gambling in which tickets are sold and a drawing is held to distribute prizes. It can also refer to any process in which prize money is allocated by chance, such as a contest or an auction. Most governments run state-sponsored lotteries in addition to private ones that are often operated by churches, charities, or other organizations. State-sponsored lotteries are also known as public lotteries or state lottery games. In some countries, such as the United States, a state-run lottery is required to comply with various regulations, including those governing advertising. These laws seek to prevent misleading and deceptive advertising, particularly relating to odds of winning and the value of jackpots. Many critics argue that state-sponsored lotteries are not suitable for public funding and may promote problem gambling.

A state-run lottery is a monopoly in which the government establishes a state agency or public corporation to run the operation (as opposed to licensing a private firm in return for a share of profits). Traditionally, lotteries began operations with a modest number of relatively simple games. They typically expanded in size and complexity as the demand for additional revenue increased. Lottery revenues have long been a critical source of public finance in many states.

As a result, lottery officials are frequently under pressure to increase revenues and may prioritize these goals above other state priorities. The resulting policies, however, can create significant problems. The first of these concerns is that a state-run lottery focuses on encouraging people to gamble, which can lead to negative consequences for poorer groups and problem gamblers, especially in states with high rates of gambling. Lottery advertising is often deceptive and may portray the chances of winning a prize as higher than they actually are, while inflating the value of lottery jackpots (which are usually paid in equal annual installments over 20 years, with inflation and taxes dramatically eroding the current value).

Another concern with state-run lotteries is that they encourage people to spend more time on gambling, which can be detrimental to their health. The second of these concerns is that the existence of a lottery undermines the integrity of other forms of gambling, such as private games. Finally, many critics allege that lotteries compel people to gamble even when they do not have the means or inclination to do so.

In the modern era, state-sponsored lotteries are a classic example of policy being made piecemeal and incrementally, with little or no overall overview. As a result, the resulting policies are often at cross-purposes with the overall public welfare. Lottery officials also face criticisms based on their management of the industry, such as the alleged regressive impact on lower-income groups or the tendency to promote compulsive gambling.