A lottery is a game where participants pay a small amount for a chance to win a large prize. Lotteries are a popular form of gambling and are often criticized as an addictive form of taxation, but the money raised by these games can also be used for good causes in the public sector. For example, the National Basketball Association holds a lottery each year to determine which teams will have first pick of the best college talent in the draft. Other common examples of lottery are a random draw for units in a subsidized housing block or kindergarten placements.

The earliest known lotteries were in the Low Countries in the 15th century, when towns held them to raise funds for a wide range of public usages. The prizes were usually cash, but occasionally goods were offered as well. Some scholars argue that these early lotteries were an attempt to circumvent the imposition of a direct tax, and they were hailed as a painless form of government revenue.

In the United States, state-run lotteries are common and fund a variety of projects, from education to law enforcement. The proceeds of these lotteries are usually paid out as a lump sum to the winner, although some states offer an annuity option that pays out payments over a period of years. The breakdown of how lottery funds are allocated varies by state, but a significant share typically goes toward administrative and vendor costs.