Lotteries have a long history in the U.S., stretching back to the colonial era. Then, legislatures used lotteries to raise funds for colonial governments, relief for the poor, and universities, among other public goods. During the 1820s and 1830s, though, many states took steps to ban state and private lotteries after scandals emerged about rigged and unfair games. Reformers criticized lotteries as regressive and harmful to working people, and state constitutions soon prohibited them.
After the Civil War, lotteries became popular again. Southern states saw them as an easy way to raise revenues without imposing new taxes. Soon, people were purchasing tickets for the Louisiana State Lottery by mail, not just within the state but across the nation. Concerned about the corruption of public morality, and as President Benjamin Harrison put it, “the robbery of the poor,” Congress used its power to regulate interstate commerce to crack down on state lotteries by the end of the 19th century.
But legal gambling emerged again in the 20th century. Nevada legalized casino gambling during the Great Depression. State lotteries followed, beginning with New Hampshire, in 1964. The Granite State was one of few states without income or sales taxes, and the lottery’s proceeds were to go to the public school system. Entering cost $3 and people dreamt about taking home the winnings, which were pegged to a horse race. People might walk away with a prize ranging from anywhere between few hundred dollars and $150,000.
People played enthusiastically, and other states soon followed in the 1970s and 1980s as cities and states became more fiscally strained, thanks to inflation, low corporate taxes, and veneration of the free market. Politicians hesitated to raise direct taxes on citizens, lest they lose reelection, and so lotteries became a popular method of raising funds.
Some states turned to casino gambling as another source of revenue. In 1976, New Jersey voters opted to legalize gambling in Atlantic City, a decision that drew casino operators to the storied boardwalk in droves over the next decade. The city was once a premiere destination for visitors hoping to catch sun and sea down the shore, but the city had fallen on hard times. Casino gambling was understood as a good bet for reviving tourism and raising revenues.