Lottery Pools
Lottery pools are very common and very popular. They exist in workplaces, recreation centers, clubs and civic organizations, bars and night clubs, schools and colleges and a variety of other settings where groups of people come together.
Lottery pools range in size from small to large and from very laid-back to very formal, complete with voting, elected positions and bylaws.
All lottery pools share the same purpose, that being to share the costs and the benefits of playing the lottery on a scale beyond the means of the individual members of the pool.
The theory behind lottery pools is simple; the more tickets bought the greater the odds of winning and in exchange for better odds of winning, pool members agree to share lottery costs and winnings.
The golden rule of lottery pools is equally simple, “All pool members pay in and cash out equally”.
Beyond the golden rule there are many variations in how a lottery pool might operate. Below are several issues which come into play and should be considered when contemplating starting or joining a lottery pool.
1. Buy-in amount and frequency - How much does each pool member contribute and how often? This will be the biggest factor for many potential pool members. Some common amounts are $5 - $10 per-member in smaller pools and $1 - $5 in larger pools. The majority of lottery pools operate on a weekly buy-in basis, some on a twice monthly basis. A few pools increase the buy-in amount when the value of the lottery jackpot reaches a specified amount in order that the pool can purchase more tickets.
2. Pay-outs - While everyone playing lottery wants to hit the jackpot the truth is that only a few do so. Yet many others win smaller amounts, ranging from a few dollars to many thousands of dollars. Lottery pools are no exception to the reality of non-jackpot wins and the members of the pool must have a means of dealing with these wins.
Typically any wins by the pool are simply distributed equally among pool members. In some pools winnings are used to purchase extra lottery tickets for the next drawing. In others the winnings are retained in the pool to purchase extra tickets when the jackpot reaches a specified amount. And in some, pool members vote on what to do with any winnings on a case by case basis.
In those pools where winnings are retained in the pool, there should be a provision to ‘cash out’ current members leaving the pool and a provision to address the issue of new members entering the pool. By far, the simplest solution is to distribute all pool winnings to its members at the time of the win.
(3) Trust - Lottery pools are ‘trust systems’ where in members trust each other to contribute their fair share, they trust the designated member(s) to use the pool funds to purchase lottery tickets and safeguard them, they trust that each member will receive a complete list of all pool numbers in play before each drawing, they trust that any winning ticket will be redeemed and they trust that they will receive their fair share of any winnings.
Anything that comes between any member of the pool and this level of trust of other members will adversely affect the entire pool.
If a lottery pool is to function successfully, a strong and verifiable trust must exist. The key to verification is documentation in the hands of every member before every lottery drawing. Lottery ticket serial numbers and the lottery picks on those tickets must be available to every pool member before the drawing. Verification that every pool member paid in to the pool must be available to every pool member and verification that prize winnings were distributed equally or retained as applicable must be available to every pool member. Although lottery pools are often informal, they should document their financial transactions to the satisfaction of all members.
(4) Shared work - Collecting pool money, purchasing lottery tickets, documenting ticket serial numbers and the actual lottery picks and providing this documentation to pool members is work. In a lottery pool it should be shared work, usually on a rotating basis and provision should be made to address the issue of members scheduled to do this work being unable to do so for a variety of reasons, both personal and worked related. A lottery pool is much like a team, to function property it must work together like a team.
(5) What to play - Obviously a lottery pool exists to play the lottery. Most of the big jackpot lotteries have a provision for a ‘multiplier’ for non-jackpot prizes. In the Powerball Lottery this multiplier is called the “Power Play”. Adding the multiplier to a lottery ticket basically doubles its costs in exchange for multiplying potential winnings. A $1 lottery play becomes a $2 play and so forth. Since multipliers apply only to non-jackpot winnings the lottery pool members should decide at the pool’s creation whether it will or will not purchase the multiplier on its lottery ticket purchases without regard to potential jackpots. Most lottery pools do not go the multiplier route, but some do.
There are other issues that arise in lottery pools. This article has addressed only the most obvious and what are frequently the most problematical. This as food for thought for those contemplating starting or joining a lottery pool. In a subsequent follow up to this article we will delve into additional issues involving lottery pools and why some lottery pools fall apart.