A lottery is a form of gambling in which numbered tickets are sold and prizes are awarded to the holders. It may be played for money or goods. Lotteries are legal in some countries but illegal in others. They are also a common way to raise funds for public purposes such as building roads or schools. The word lottery is derived from the Dutch noun “lot,” meaning fate or fortune. In the United States, state lotteries are regulated by law and are operated as private businesses. They are primarily used to fund public projects, but are sometimes financed by a combination of state and private money. The lottery industry has experienced a period of rapid growth in recent years. It has been fueled by an increasing awareness of the potential for addictive gambling, as well as by the popularity of instant-win scratch-off games.

The term lottery is also applied to a competition based on chance, such as a beauty pageant, in which the winners are chosen by a panel of judges, or a sports team draft, in which players submit names and are selected at random to join a given team. A competition involving skill or requiring more than just luck, such as an academic scholarship or a fellowship, can be considered a lottery, but only if the first stage of the contest relies entirely on chance.

Governments that endorse lotteries may restrict who can play, regulate the prize amounts, and oversee the operation of a lottery. They may also prohibit the sale of tickets to minors and regulate the distribution and sales of the tickets. The prize winnings are often taxed.

In the US, the states operate the majority of lotteries. New Hampshire was the first to introduce one in 1964, followed by New York and then 10 other states by 1970. Currently, 37 states and the District of Columbia have lotteries. The introduction of a state lottery generally follows a similar pattern: the legislature authorizes the creation of a monopoly, establishes a government agency or public corporation to run the lottery, and begins operations with a small number of relatively simple games. Revenues initially expand dramatically, but then level off and occasionally decline. This prompts the introduction of new games in an attempt to maintain or increase revenues.

While the success of a lottery depends largely on its ability to attract and sustain interest, it also requires an adequate level of funding. While governments can choose to raise revenue in a variety of ways, lotteries are particularly popular among voters and politicians because they appear to be a painless form of taxation. In addition, many proponents argue that lotteries promote civic virtue by encouraging citizens to spend their money voluntarily on the common good. However, research has tended to show that lottery participation disproportionately affects low-income households. In the United States, this trend is exacerbated by the fact that most state lottery revenues come from middle-income neighborhoods, while lower-income households tend to buy fewer tickets than their counterparts in the higher income brackets.