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Secrets of State Lottery Scratch-off Contracts

When most people think of advantage gambling, state lottery scratch-offs are the last thing that enters their minds.

Everyone’s heard of counting cards at blackjack. There are even several moviesabout it.

And poker has been shown to be a game of skill; just look at the repeat winners of major tournaments like the World Series of Poker and the World Poker Tour.

But most people still refer to the lottery as an “idiot tax”.

And scratch offs have a notoriously bad expected value (which you can think of as a gambling game’s return on investment).

To give you an example of how bad lottery tickets can be, most $1 scratch offs have an expected value of around 60%, meaning for every $1 you spend, you’re expected to get back just $0.60; a $0.40 loss.

Most penny slots have paybacks that are better than that.

And other gambling games, like blackjack, can approach 99% payback without any card counting at all.

I’m here to shed light on a new way of thinking about scratch-offs and show you how you can improve your odds. It won’t always be profitable.

But under the right circumstances, it can be. If you’re going to play regardless, you might as well maximize your chances of winning.

Here are my insights about how to win at scratch-offs. I’ve gained these insights by reading the contracts and procurement documents that state lottery organizations have with their ticket printers.

Combine these insights with sites that calculate a scratch-off ticket’s odds, and you’ll be playing like a sharp

Where Are Scratch-off Grand Prizes?

Grand prizes are not random.

I’m sure all of these insights will come as a surprise.

But this one is probably the biggest.

Surely the state wants to ensure a fair game.

How can it be fair if the biggest prizes of all aren’t even random?

Here’s an image of the procurement document that the Massachusett’s lottery used to elicit bids from ticket printers:

You’ll see that they require the grand prizes to be distributed evenly throughout the game.

Note that “distributed evenly throughout the game” is not random.

If the prizes were random, then they might all appear at the start of the game. Or they might all appear at the end of a game.

But the state doesn’t want that to happen. If all of the grand prizes were claimed at the start of the game, then people would stop playing the game because they would have no shot at the big money.

You can take advantage of this fact by figuring out how many tickets are in a “pool” where a grand prize should be. If there are 9,000,000 tickets and 3 grand prizes, then divide 9,000,000 by 3 to figure out that there must be 1 grand prize every 3,000,000 tickets.

Then, use the state’s lottery website to figure out how many tickets remain. Most states publish this information for each game.

In the example game just mentioned, if there were 7,000,000 tickets remaining and still 3 remaining grand prizes, then you know the first grand prize must be in the next 1,000,000 tickets. Your odds just improved from 1 in 3,000,000 to 1 in 1,000,000.

That may not seem like much, but it can mean the difference between negative and positive expected value.

Is There A Limit To The Number Of Big Winning Tickets In A Roll?

Here’s an image from documents filed as part of a Texas lawsuit against the state and the ticket printer:

In this contract that Texas has with IGT, there’s a clause that states that there can be no more than a certain number of $25-$50 winners per pack of tickets. There’s another clause that states there can be no more than one winner of $75 and higher per pack. (The “one” is redacted, but we can deduce that tit’s one by looking at the word following the redaction, which is “winner” rather than “winners”).

How can you use this to your advantage?

Buy only one ticket from a pack at a time and scratch it right there at the store.

If it happens to be a big winner, don’t buy any more tickets from that pack.

What Is The Minimum Payback for a Roll of Scratch-off Tickets?

This next image is from the request for a proposal from the New Mexico lottery association to ticket printers:

It shows that each pack of tickets has some guaranteed payout. The details of the guaranteed payout aren’t specified, but from other contracts and personal experience, I’ve found it to typically be about 50% of the price of a pack of tickets. If an entire roll of tickets costs $600, then the GLEP is usually about $300.

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What this means for the advantage player is that you should not stop buying after a string of losers.

Since each roll of tickets is guaranteed to have a certain minimum payout, then every loser you see increases the chance that the remaining tickets are winners.

Conclusion

While none of the above insights will guarantee you will win, they are just a few of the things you can do for yourself if you want to know how to beat scratch-offs.

Combine these insights with some expected value calculations from the remaining prizes that get displayed on the state lottery websites and you’ll be doing way better than the average lotto player.

Good luck.

About the Author

Eric Ihli, a professional gambler/programmer, spent 10 years as a full-time professional gambler and 5 years as a software engineer. He now combines those two passions by writing software to discover and evaluate profitable gambling opportunities.

A scratchcard (also called a scratch off, scratch ticket, scratcher, scratchum, scratch-it, scratch game, scratch-and-win, instant game or instant lottery. In England a scratchie, lot scrots, or scritchies. Mostly, a small card, often made of thin paper-based card for competitions and plastic to conceal PINs, where one or more areas contain concealed information which can be revealed by scratching off an opaque covering.

Applications include cards sold for gambling (especially lottery games and quizzes), free-of-charge cards for quizzes, fraudulent free cards encouraging calls to premium rate phone services, and to conceal confidential information such as PINs for telephone calling cards (otherwise known as recharge cards) and other prepaid services.

In some cases the entire scratchable area needs to be scratched to see whether a prize has been won—the card is printed either to be a winner or not—or to reveal the secret code; the result does not depend upon what portions are scratched off. In other cases, some but not all areas have to be scratched; this may apply in a quiz, where the area corresponding to the right answer is scratched, or in some gambling applications where, depending on which areas are scratched, the card wins or loses. In these cases the card becomes invalid if too many areas are scratched. After losing one can scratch all areas to see if, how, and what one could have won with this card.

Technology[edit]

The scratchcard itself is made of paper-based card, or plastic, with hidden information such as PIN or HRN (Hidden Recharge Number) printed on it, covered by an opaque substance (usually latex). The original cards were covered with an environmentally unsafe solvent based coating. In the late 1980s, adhesive specialist Jerome Greenfield invented a safe water-based coating still used in scratchers today that can be scratched off relatively easily, while resistant to normal abrasion. Other types of scratch panel are scratch labels, hot stamp foil or 'sandwich' label which are technologies that is easy to produce for manufacturers without specialised equipment for applying latex panels. Unlike silkscreen latex panels that bond with the card body, labels are distinctly separate to the card body and applied by adhesion which makes them prone to sophisticated and fraudulent manipulation.^[1]

Gambling and quizzes[edit]

Origins[edit]

The original game tickets were produced using manual randomization techniques. In 1974 the American company Scientific Games Corporation led by scientist John Koza and retail promotions specialist Daniel Bower produced the first computer-generated instant lottery game.^[2] In 1987, Astro-Med, Inc. of West Warwick, Rhode Island, received the U.S. Patent for the instant scratch-off lottery ticket.^[3]

Simple prize scratchcards require the player, for example, to scratch off three (or more) areas hiding numbers, symbols, etc. If all the items revealed are the same, a prize has been won. More complicated scratchcards have several different ways to win on one card. Other scratchcards involve matching symbols, pictures or words, or are adaptations of popular (card-)games such as blackjack, poker or Monopoly. Games are also tied to popular themes such as Harley Davidson, Major League Baseball, NASCAR, the National Hockey League, Marvel Comics and FIFA World Cup.

There are currently two major manufacturers of game tickets: Scientific Games Corporation, with production facilities in the USA, Chile, UK, Germany, Canada, Brazil and Australia; and Pollard Banknote, with production facilities in the USA and Canada. There are several other smaller manufacturers in North America, Europe, and Asia.

Popularity[edit]

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Scratchcards are a very popular form of gambling due to their low cost and the opportunity to win instantly, as opposed to waiting for a drawing like many lotteries. There is a trend^{[citation needed]} towards more expensive scratchcards (20-50 USD) that have prizes in the millions of dollars. However, many such 'instant' tickets sold in the US, especially in Massachusetts and New York, do not pay top prizes 'instantly,' but rather over many years, with no cash option.

The popularity of lottery scratchcards has been increasing at a greater rate than any other form of lottery.^{[citation needed]}

Predictability[edit]

In the 21st century there have been attempts to increase the odds on finding a prize-winning card based on statistics, by tracking the amount of prize money won and cards sold to calculate accurate current odds. There have been a number of instances where a series of cards are still available although all major prizes have been won. Some lotteries make this information available to all free of charge to help promote their games ^[4] Hypothetically, large early payouts may exceed ultimate sales before expiration of the game card series. However, the low odds of winning – typically from less than 1 in 5 to about 1 in 2.5 – and players who buy cards unaware of the low return offset these losses, so the lottery still makes a profit.

Second-chance sweepstakes[edit]

Many state lotteries also run a second-chance sweepstakes in conjunction with the retail sale of state lottery scratchcards in an effort to increase consumer demand for scratchcards and to help control the litter problems associated with the improper disposal of non-winning lottery tickets.^[5] Since lottery tickets and scratchcards are considered in the United States to be bearer instruments under the Uniform Commercial Code,^{[citation needed]} these scratchcard promotions can be entered with non-winning tickets that are picked up as litter.

Break opens[edit]

Break Opens, also known as breakopens, break open cards, strip tickets, pull-tabs, nevada tickets or in some Bingo Halls as 'pickles' are lottery or bingo cards on which there are concealed letters, numbers, or symbols that have been predetermined as winners. The cards are often made of cardboard and contain perforated cover window tabs, behind which the combinations are printed. The purchaser must 'break open' the card, or pull up the pull-tabs, to see the information printed within, and then must confirm with winning combinations printed on the back of the card, various cards may have come from the printer highlighted as winning under the tabs. The winning combination will be highlighted, making the identification of winning tickets easier.

Online gambling scratchcards[edit]

By around 2010 online versions of virtual 'scratchcard' (not physical cards) gambling games which utilized Macromedia Flash and Java to simulate scratching a card on a computer were available. Virtual cards could be bought, and prizes collected, over an Internet connection.^[6]

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Fraudulent practices[edit]

A widespread misuse of scratchcards is the free-of-charge distribution of cards offering a range of prizes, ranging from extremely low-value to very desirable; for example from time-limited discount vouchers redeemable only through a specified agent to cars. Cards always reveal that a prize has been won, but the nature and value of the prize can only be determined by phoning a premium rate telephone claim line costing a significant sum per minute. Calls to this number are designed by the promoter always to take several minutes, and the prize won is, in reality, always of far less value than the cost of the call, and usually not worth claiming. Regulatory authorities for telephone services have been taking action against such schemes, issuing warnings and large fines.^[7]

Games sold with claimed jackpots[edit]

Over the years, many lotteries have continued to sell scratch games, while failing to disclose that the larger prizes or jackpot have already been claimed in order to discourage players from no longer playing a won scratch game, though before the 2000s and direct connections between the lottery and their sales terminals could be made, there was no expectation of this to be known. In February 2018 it was reported that some scratch cards in the UK are still sold even after the jackpots have already been won. Research by The Guardian newspaper found that the £250,000 Gold game, which advertises 15 top prizes worth a quarter of a million pounds each, were still being sold after all 15 jackpots had been claimed.^[8]

This happened again in May 2018, in which the 20X Cash Scratchcard was still being sold after the last jackpot prize was claimed.^[9] Many lotteries since the start of the 2010s have begun to have their retailers print out up-to-date game lists from their terminals daily or weekly (often with the force of state, provincial, or national law after consumer watchdog organizations or television station investigative units have exposed the practice), which note games where jackpots have already been won or which have large prizes left, along with up-to-date winners' lists on their websites.

Cards hiding confidential information[edit]

Scratchcards can also be used to distribute confidential information, without any element of chance or skill. A common example is the phone card or recharge card sold for a price which provides specified phone call usage. The card itself, unlike a credit card, has no function in itself; it is simply a vehicle to inform the purchaser confidentially of the PIN required to make the phone calls paid for.

Gallery[edit]

See also[edit]

References[edit]

1. ^https://www.slideshare.net/NigelPageMIEx/scratching-the-surface-white-paperrecharge-card-security-npagedec2010
2. ^'John Koza Interview – Scratchcards.org'. Retrieved 10 January 2016.
3. ^United States Patent 4,643,454
4. ^Washington's Lottery. Financial Report 2016.
5. ^Tennessee Lottery. Play It Again Program – FAQ.Archived 2007-09-28 at the Wayback Machine
6. ^www.play-scratchcards.co.uk describing different Internet scratchcards. Encourages play, but not associated with any one provider.
7. ^'Scratchcard prizes may be misleading, OFT warns'. the Guardian. Retrieved 10 January 2016.
8. ^'Jackpots on some National Lottery scratchcards impossible to win'. Retrieved 16 February 2018.
9. ^'Man Wins £1,000,000 On The Last 20X Cash Scratchcard'. Retrieved 8 September 2018.