Headline-grabbing sums seem to be the new normal.
- The Multi-State Lottery Association (MUSL), which operates the Mega Millions and Powerball lotteries, is responsible for major changes in its games.
- A larger player base means more money in the pot.
- High interest rates can also artificially inflate the quoted jackpot.
If the recent trend of huge jackpots has caught your eye, you’re not alone. In fact, grabbing the public’s attention may be exactly why the jackpots are increasing. The last seven years have seen the 10 biggest US lotteries ever won, half of them since 2021. But before you try your luck, it might be worth asking why these jackpots are so high – and what it might mean for you. .
Change the game
The Multi-State Lottery Association is one of the biggest names in intrastate gambling and has near complete control over the games it runs. And when these games, including Powerball and Mega Millions lotteries, rack up billions of dollars, even small changes can have a huge impact.
One of the reasons for big jackpots is that they are harder to win. Prior to 2017, your odds of winning the Mega Millions lottery were approximately one in 258.9 million. In October of that year, MUSL lengthened the long odds even further, reducing your odds of winning to around one in 302.6 million. And when it’s harder to win, the chances of the jackpot going unclaimed and continuing to grow are better.
What is a dollar worth? If you are the MUSL, the answer could be millions. Among the 2017 rule changes, the ticket price for the Mega Millions jackpot was increased from $1 to $2. A change that may not affect the consumer much could increase the grand prize significantly.
MUSL has its roots in an agreement between five low-population states and the District of Columbia in 1987. The association has grown significantly since then and now sells tickets in 45 states.
Much of this growth has occurred since 2009, with the addition of 14 new states since then. This explosive growth can be attributed to an agreement negotiated in October of the same year allowing the cross-selling of Mega Millions and Powerball tickets.
A larger player base means more tickets sold and more tickets sold means a bigger jackpot. So, will this growing player base continue on its upward trajectory? Probably not. As of this writing, only five states currently do not sell Mega Millions or Powerball tickets, leaving MUSL with limited room for development.
It’s a safe bet! Our best high-yield savings accounts
Another contributor to eye-popping jackpots in the headlines has nothing to do with how the game is played or by whom. Rising interest rates can artificially magnify the grand prize, or at least the oft-cited annuity option.
Once the excitement of winning the lottery wears off, the winner is faced with a choice: take the prize as a lump sum or be paid over an extended period of time; 29 for Mega Millions and Powerball jackpots. But here’s the catch: these two options pay different amounts. This is the concept of the time value of money.
The annuity option takes into account an annual interest rate, and when interest rates across the economy rise, the interest paid to a lottery winner who chooses an annuity also rises. The annuity option counts these interest payments accumulated over decades in its total value. While the most recent, as yet unidentified Mega Millions winner took home $1.348 billion, he would only receive $723.5 million if he accepted the lump sum.
Jackpots of staggering sizes seem to be the norm now, but the math behind them might make you think twice. Although some of the inflation is artificial thanks to rising interest rates, the game has become harder to win. Plus, more players mean more chances of having to split the prize if you win. However, it can be hard not to take a chance with a billion dollars at stake.
Alert: The highest cash back card we’ve seen now has 0% introductory APR through 2024
If you use the wrong credit or debit card, it could cost you dearly. Our expert loves this top pick, which features an introductory APR of 0% until 2024, an insane cashback rate of up to 5%, and all with no annual fee.
In fact, this map is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.
Read our free review