Cracking the Scratch Lottery Code

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In North America, the vast majority of lottery tickets—everything from daily draw Pick 4-style games to small-stakes tic-tac-toe and bingo scratchers—are produced by a handful of companies like Scientific Games, Gtech Printing, and Pollard Banknote. These publicly traded firms oversee much of the development, algorithm design, and production of the different gambling games, and the state lotteries are largely dependent on their expertise. Ross Dalton is president of Gtech Printing, and he acknowledges that the "breakability" of tickets is a constant concern. (Several other printing companies declined to comment.) "Every lottery knows that it's one scandal away from being shut down," Dalton says. "It's a constant race to stay ahead of the bad guys." In recent years, Dalton says, the printers have become increasingly worried about forensic breaking, the possibility of criminals using sophisticated imaging technology to see underneath the latex. (Previous forensic hacks have included vodka, which swelled the hidden ink, and the careful use of X-Acto knives.) The printers have also become concerned about the barcodes on the tickets, since the data often contains information about payouts. "We're always looking at new methods of encryption and protection," Dalton says. "There's a lot of money at stake in these games."

While the printers insist that all of their tickets are secure—"We've learned from our past security breaches," Dalton says—there is suggestive evidence that some state lotteries have been gamed. Consider 2003 payout statistics from Washington and Virginia, which Srivastava calculated. (Many lotteries disclose claimed prizes on their websites.) In both states, certain scratch games generated payout anomalies that should be extremely rare. The anomalies are always the same: Break-even tickets—where the payout is equal to the cost—are significantly underredeemed while certain types of winning tickets are vastly overredeemed. Take a blackjack scratch ticket sold by Virginia: While there were far too few $2 break-even winners redeemed, there were far too many $4, $6, $10, and $20 winners. In fact, the majority of scratch games with baited hooks in Washington and Virginia displayed this same irregularity. It's as if people had a knack for buying only tickets that paid out more than they cost.

According to Srivastava, that could well be what's happening. (The state lotteries insist that people simply forget to redeem break-even tickets, although it remains unclear why only some games show the anomaly.) "Just imagine if there were people who made a living off plundering the lottery," he says. "The first thing you'd want to do is avoid the losing or break-even tickets, which is why they're underreported. They're a waste of time. Instead, you'd want to buy only the tickets that made money. If there were people doing this, if there were people who could sort the winners from the losers, then what you'd see on the payout statistics is exactly what we see. This is what a plundered game looks like."

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