Americans spent $58 billion dollars on lottery tickets in 2011 in hopes of defying the odds and striking it rich. The tremendous popularity of the lottery despite it’s horrific return on investment has led some to cynically label the lottery as a stupidity tax. However, a group of MIT students figured out how to turn the lottery from a losing proposition into a lucrative enterprise. They recognized that about every 3 months when the Massachusetts Cash WinFall jackpot reached roughly $2 million, the payoffs for smaller prizes would significantly increase if there was no winner. Like a card counter waiting for the odds to swing into the player’s favor, the lottery group would wait until the jackpot reached a level high enough to produce an advantageous investment opportunity. By purchasing $100,000 worth of tickets, they virtually guaranteed they would win. The MIT lottery syndicate purchased over $40 million in tickets from 2005 to 2011, winning approximately $48 million.
Lottery officials learned about the profitable loophole but didn’t take action because the professional gamblers generated millions in revenue for the lottery. After the the loophole became public in 2011, lottery officials enforced a $5,00o limit on the amount of the tickets that retailers could sell per day. Earlier this year the Cash WinFall game was stopped. More details here…..