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Why most people refuse to sell their lottery tickets for twice what they paid

  • The lottery provides a wonderful real life test for how the cognitive bias of regret avoidance impacts our decision making.
  • The Powerball jackpot rose to $700 million at the time the above video was first published โ€” the current Powerball jackpot has reached over $620 million.
  • Meanwhile, the Mega Millions jackpot has reached $1.6 billion, putting the combined jackpot at $2.2 billion.
  • When making decisions, we can anticipate future regret and incorporate the weight of that into our decision making.
  • Business Insider’s Sara Silverstein tested this bias by offering to buy people’s lottery tickets for more than they paid for them.

The current Powerball jackpot has reached over $620 million. We used this opportunity to test a cognitive bias known as regret avoidance.

We constantly have to make decisions without perfect information โ€” like choosing an investment, picking a new job or deciding to buy a lottery ticket. We consider the possible outcomes and the probability of each and make the best choice with the information we have.

If new information becomes available after we have made a decision we sometimes experience regret โ€” like feeling buyer’s remorse after deciding to purchase an expensive item that goes on sale after your purchase.

When making decisions, we can anticipate future regret and incorporate the weight of that into our decision making. Lotteries provide a wonderful real life test for how regret avoidance impacts our decision making.

We have an office lottery pool which over 50 people participated in. We polled the participants and found that 86% of them joined the pool because they would be miserable if their colleagues won and they were left out. For many, It’s an easy decision to pay $2 to avoid the possibility of feeling so much regret. That is regret avoidance.

But to really test this, let’s make one choice clearly superior. We went outside and tried to buy lottery tickets from people for more than they paid. The rational choice, in this case, would always be to sell your ticket and buy more tickets or pocket the extra cash and replace your tickets. But people aren’t known to be rational.

Most people refused to sell us their tickets for twice what they paid. They were worried that they might be selling a winning ticket and that decision would be too much to bear.

The Powerball jackpot has risen to $620 million. We offered to buy people's lottery tickets for more than they paid for them to test a cognitive bias.

Can You Buy Lottery Tickets Online?

Is It Legal (and Safe) to Buy Lottery Tickets Through the Net?

Image (c) onurdongel / Getty Images

Every so often, lottery fever sweeps the nation and everyone wants to get their hands on a potentially record-breaking lottery ticket. If buying a ticket is not easy for you for whatever reason, perhaps because you are homebound or not in the country at the moment, buying lottery tickets over the internet seems like a simple solution. Is it possible to buy lottery tickets online? Is it legal? Is it safe?

The Dangers of Buying Tickets Over the Internet

The United States government, like most other governments around the world, heavily regulates how lottery tickets can be bought and sold because the potential for fraud is so high. U.S. citizens alone spend billions of dollars on lottery tickets every year, so it’s important to be sure that the tickets are valid and that the promised prizes are really awarded.

Without these protections, we’d have many more cases where tickets are sold but, when the winning numbers come up, the buyer is out of luck because the ticket was forged and the seller simply pocketed the money. Or where retailers ensure that they are only selling losing tickets to customers.

To counteract these scams, lottery retailers need to be licensed. What they need to do to get a license varies by state, but it’s common that retailers need to have a criminal background check to get a license to ensure that they haven’t been involved in any felonies or illegal gambling schemes, and that they have to post a hefty bond to ensure that their tickets are awarded fairly.

Now, if people can buy lottery tickets online, it opens doors to fly-by-night organizations who can take advantage of customers on a large scale and then disappear overnight when they are caught.

Because of this high risk to consumers, there are laws in the United States and many other jurisdictions that restrict or prohibit online lottery sales. However, that doesn’t mean that it’s totally illegal or impossible within the United States.

What Does U.S. Law Say About Buying and Selling Lottery Tickets Online?

There are two kinds of lottery laws in the United States: federal and state laws.

Federal law is pretty clear that buying or selling lottery tickets by mail is illegal and punishable by fines or jail time. 18 U.S. Code ยง 1302 states:

“Whoever knowingly deposits in the mail, or sends or delivers by mail. any lottery ticket. any check, draft, bill, money, postal note, or money order, for the purchase of any ticket. shall be fined. or imprisoned not more than two years.”

But the internet has opened up new ways for people to buy tickets remotely. The internet is not covered by the postal code, so can we just move on to state laws?

Not quite. For many years, a federal law that prevented online lottery sales for many years is the Interstate Wire Act of 1961, which states:

“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both”

However, in December of 2011, the Department of Justice released an opinion that the Federal Wire Act applies specifically to sports betting,

“In a 13-page opinion, dated September 20, 2011, the U.S. Justice Department (DOJ) concluded that the federal Wire Act’s anti-gambling provisions do not bar states from selling lottery tickets over the Internet because the act’s prohibitions apply only to Internet transmissions that relate to ‘sporting events or contests.'”

This opened the doors to let states consider whether they should offer online sales for their lottery tickets.

States Which Allow Online Lottery Sales

Even with federal law allowing online lottery sales, many states have been reluctant to actually do so. Aside from the risks of fraud, there are also other problems. For example, it’s much harder to ensure that tickets aren’t being sold to people under the legal age to buy tickets. Plus, the states risk sales tax losses from people who go to a convenience store or gas station to buy a lottery ticket and end up making a few other purchases while they are there.

Currently, six states offer legal online lottery purchases:

  • Georgia
  • Kentucky
  • Illinois
  • Michigan
  • New Hampshire
  • Pennsylvania

In 2014, Minnesota became the very first state to offer lottery games online; however, a year later, they pulled all of the games and stopped selling lottery tickets online.

Many of the participating states have tight restrictions about ticket sales; for example, only allowing residents to buy tickets online. With offline sales, you need to by physically present, but you don’t have to live in the state or even be a U.S. resident.

Furthermore, most states offer only a few games. Powerball, for example, can only be bought online from Illinois or Georgia, whereas California residents can use a lottery app to have someone buy Powerball tickets for them.

How to Stay Safe While Buying Lottery Tickets Online

If you decide to try your hand at playing the lottery over the internet, make sure you do your due diligence before buying tickets.

Keep in mind that residents of most United States cannot legally buy lottery tickets online. Watch out for websites that seem to let you buy tickets, but which are actually giving you the “opportunity” to bet on the outcome of the lottery draw.

Don’t fall for hype or for promises made by lottery apps and websites. Your safest option is to go through an official state lottery website if one is available to you. Make sure that you know which company you are handing your money over to, and research any website thoroughly before you commit.

Buying lottery tickets online would be convenient, but is it safe and legal? Find out where and how you can buy lottery tickets on the internet.