No-loss lotteries
Historically, lotteries have been run by the State, which used them as a vehicle to finance operations without having to pay taxes. In Europe, for example, they were instrumental in post-World War II reconstruction. They also serve to level the State’s finances: in France, the FDJ, the State lottery (before going public in 2019) with a total monopoly on gambling, was founded in 1933 to fill the coffers of the French State following the 1929 crash. Universities such as Harvard or Princeton also took advantage of the lottery system to be built.
If creative monopolies (e.g. Microsoft early-stage) are supposed to bring a benefit to the many rather than the few (while enriching the founders), non-creative monopolies enrich those who are at the reins while denigrating any progress — financial or technological — to the many.
State lotteries as we know them today are a response to this rule all the more so because even if the revenues were used to finance associations, infrastructure projects etc.; the ability of a government that changes every 4/5 years to be a financial and project manager is severely limited.
Thus, instead of encouraging the development of the many, lotteries are one of the many state vehicles that lead to the accentuation of inequalities. The further down the class, the greater the addiction. Coming from a middle-class background, I saw my mother play the lottery once or twice a week for decades.
To compensate for this aberration, we have seen alternatives emerging:
Prize-linked savings account:
A prize-linked savings account or PLSA (also called a lottery-linked deposit account) is a savings account where some of the interest payment on bank deposits or marketing dollars are distributed as prizes based on chance (Wikipedia).
The system:
Each person can deposit each month a small amount of money hoping to win the lottery while having the insurance of never losing that money.
Even though it is a better mechanism than payed lotteries, it does not make sense economically for the one with low-income that will always be in the need of pulling the plug to use money for whatever expense.
Bravoloto: “The Ad-dollar scheme”
The system:
Instead of paying $2 for your lottery ticket, you can participate by watching ads or through affiliation (downloading an application, taking a survey, etc.). A portion of these “ads-dollars” generated by bravoloto are redistributed among the participants. Today, bravoloto is one of the leading no-loss lotteries in Europe with almost 9M users.
PoolTogether: “The crypto-scheme”
The system:
PoolTogether is one of my favorite companies out here.
PoolTogether is an application that turns saving money into a game. It does this by combining the power of blockchain technology, smart contracts, and Decentralized Applications (Dapps). It is basically a savings game that gives you a potentially huge upside and minimal downside.
Players can join the game by buying saving tickets, each giving them a chance to win a prize. At the end of each week, a winner is chosen who gets the prize and their tickets back. What makes this game unique, however, is that players who don’t win also get their money back. Everyone involved keeps their money! To fund the prize, PoolTogether uses the interest earned on purchased tickets.
Players deposit stablecoins into a smart contract (the pool) to buy tickets. Each ticket costs the equivalent of 1 USD. Each player can buy as many tickets as they want, and withdraw their money at any point. The funds in the pool are sent to DeFi lending platform Compound Finance, where they accrue interest for a period (currently, one week). At the end of the week, a winner is chosen at random, who gets the interest earned by the pool and their tickets back. Simultaneously, each other player gets their tickets back, and the game restarts. (Binance)
The more money you deposit, the greater your chances of winning however, one can deposit $1 dollar and win the whole pool (which happened to a user who won $17k by depositing 10 DAI, or approximately $10).
Competition has an effect: it causes prices to fall, and for lottery participants, a game so unfair to them, it should be welcomed. One proof that the state lottery is not fair to its participants is the French State Lottery attack on Bravoloto in the Court of Appeals. Sit down, it hurts: a state lottery that causes millions of participants to lose billions of euros every year complains about a company that created a lossless lottery because of its attacks on its monopoly. 3 years of judicial attack. It’s so farcical that the it has withdrawn from attacking Bravoloto, but it still shows state-run payed lottery true colors : a negative-sum game.
