The official lottery is run by state governments and raises funds to help balance the budget. The state government pays out a large prize for a small investment, and most states make a profit. Lotteries are often popular with poorer communities because they offer a way to win money without a substantial cash outlay.
In the immediate post-World War II period, Cohen argues, there was “an arrangement in which states could expand their array of services without especially onerous taxes on middle-class and working class families.” But in the nineteen-sixties, inflation, the cost of the Vietnam War, and other pressures began to bring that era to an end. State governments found themselves struggling to maintain their social safety nets and balance their budgets, and they turned to the lottery for a solution that wouldn’t enrage voters.
People who won the lottery, however, had to pay taxes on their winnings and face public disclosure of their names if they wanted to keep it. This was a significant change in the way they lived their lives, and it fueled the growth of lottery scams.
Scammers contacted winners, usually by phone, and told them that they had won a prize and needed to pay a fee in order to receive the winnings. This was a classic example of fraud recovery fraud, and victims were advised not to respond.
The New York State Gaming Commission has a law that allows winners to remain anonymous, but only after they’ve filed tax paperwork and undergone a background check. Joe Addabbo, chairman of the Racing, Gaming and Wagering Committee, has introduced legislation that would allow people to stay anonymous by forming an LLC, but it won’t be considered until next year.