This version has been revised from its previous publication on November 8, 2022.
The current Powerball jackpot has skyrocketed to $1.73 billion, making it the second highest prize in the history of the lottery.
When Lotto America, the predecessor of Powerball, was launched in 1987, the organizers implemented a rule that restricted jackpots from exceeding $80 million. Ed Stanek, the director of Lotto America, explained that this decision arose due to concerns about the immense power that such a vast sum of money could yield, like being able to purchase a small country.
Lottery fever gripped the 1980s as an increasing number of states implemented lotteries to generate funds for education and social programs. However, smaller states struggled to match the jackpots offered by more populous states, leading to Oregon losing players to Washington and California who offered jackpots as high as $20 million.
Powerball and Mega Millions lotto tickets are sold at Foremost Liquor Store on Sunday, Oct. 1, 2023, in South Pasadena, CA.
Francine Orr/Los Angeles Times/Getty Images
The Powerball jackpot is huge, but here are 3 better ways to increase your wealth
Officials from Rhode Island, Oregon, Missouri, Iowa, Kansas, West Virginia, and Washington, D.C. collaborated to establish Lotto America. This initiative aimed to consolidate funds and provide bigger cash prizes in the hopes of attracting new players. James Davey, the former Oregon Lottery director, expressed their intention to give Oregonians an opportunity to participate in games equivalent to those in larger states.
The interstate lottery was designed based on the Canadian and US Virgin Islands lotteries. The objective of Lotto America was to provide weekly jackpots ranging from $3 million to $5 million, and the potential for even higher prizes in the future. The costs for conducting the lotteries and the profits from ticket sales were divided among the jurisdictions in accordance with the ticket sales of each state or district.
"This is a whole new ballgame," Lotto America spokesman Jack Ratigan said at the time.
Becoming Powerball
Initially, Lotto America presented players with the opportunity to select seven numbers from a pool of 40 by placing a minimum bet of $1. If a player's chosen numbers matched those drawn during the weekly drawing, they would win a jackpot that was determined by the overall number of tickets sold.
The chances of winning the top prize were approximately 1 in 19 million, which is higher than the average odds of winning in most state lottery games, which are about 1 in 8 million, according to officials.
In 1988, the initial winner of Lotto America was an Iowa farmer who had faced bankruptcy. He expressed his plans to utilize the $3 million prize money to rescue his family's farm.
One year later, the format of Lotto America shifted to choosing six numbers from a pool of 54. During that same year, a substantial $20 million jackpot was offered, and by 1991, it skyrocketed to an impressive $50 million.
In 1992, Lotto America expanded its presence to encompass fifteen states.
The game was renamed Powerball with the aim of providing players with improved odds of winning smaller prizes.
"The feedback we've received is that individuals enjoy the substantial jackpot, but they also desire increased opportunities to win smaller prizes," stated James Davey, the director of the Oregon Lottery.
Powerball soon offered a $100 million jackpot.
Westend61/Getty Images
Gen Xers are next in line for retirement. Many haven't saved nearly enough
Jonathan D. Cohen, author of "For a Dollar and a Dream: State Lotteries in Modern America," stated that during the 1990s, players began experiencing "jackpot fatigue." As a result, Powerball had to offer increasingly larger prizes to maintain interest. In the meantime, instant scratch-off games gained popularity and became the dominant form of lottery participation.
In an attempt to attract more players and boost jackpot sizes, Powerball and Mega Millions, the two biggest multi-state lotteries, made an agreement in 2010. This agreement allowed retailers to sell both games simultaneously for the first time.
A year later, the cost of a Powerball ticket was raised to $2, resulting in double the initial jackpots. Presently, the game is accessible in 45 states, Washington D.C., Puerto Rico, and the US Virgin Islands.
These alterations have significantly elevated Powerball jackpots. In the past six years alone, the five largest Powerball jackpots have emerged. The chances of winning the grand prize currently stand at 1 in 292 million.
Lotteries have a regressive nature as lower-income individuals allocate a larger portion of their funds towards participating in lottery games compared to individuals with higher incomes. Cohen noted that among all the lottery games, Powerball exhibits the least regressive pattern as wealthier individuals tend to purchase tickets particularly when the jackpot amount reaches significant levels.
But for most of the year, "theres a slow burn of disproportionately poorer people putting money into smaller prizes."
