Powerball
Powerball is an American lottery operated by the Multi-State Lottery Association (MUSL), a consortium of lottery commissions in 29 states, the District of Columbia, and the U.S. Virgin Islands. MUSL is licensed as the monopoly provider of multistate lotteries in these jurisdictions.
Powerball's predecessor began in 1988[2] as Lotto*America; the game, and name, were officially changed to Powerball on April 19, 1992. Powerball was the brainchild of Ed Stanek of the Iowa State Lottery Commission. The matrix has been changed periodically. On March 4 2001, an optional multiplier wheel (called "PowerPlay") was added. On November 2, 1997, the annuity period was changed from 20 to 25 years, and the cash option was added. The annuity currently consists of 30 graduated payments (increasing annually) over a period of 29 years. Powerball is drawn Wednesdays and Saturdays; the current estimated jackpot for Wednesday, March 19, 2008 is $15 million[1]; the cash option is $7.6 million.
The most recent announcement of a nine-figure Powerball jackpot winner ($100 million or higher annuity value) was for a ticket bought in West Virginia, for the March 15, 2008 drawing, worth approximately $276.3 million (annuity value; the winner(s), not yet known, can choose the cash option of $136.34 million instead). Among notable nine-figure wins prior to this was on a ticket that was purchased in Richmond, Indiana; that community had also produced the then-U.S. record $295.7 million (annuity) winning ticket for Powerball (July 29, 1998. The businesses in Richmond, IN (both of the Speedway convenience-store chain) that have provided two of the largest Powerball winners are situated about three miles (five kilometers) apart.
The MUSL games Hot Lotto and even Wild Card 2 are played the same as Powerball, albeit with smaller jackpots, and in only some of the MUSL jurisdictions, although Hot Lotto is scattered in mostly northern states.
Playing the game
As of 2007, to play the game, a player pays one dollar and picks five numbers from 1 to 55 (white balls) and one additional number from 1 to 42 (the Powerball number, a red ball). For an additional dollar, the player may activate the optional Power Play feature, which applies a random multiplier to all prizes except the jackpot.
| Starting date | Pick 5 out of | Pick 1 out of | Optional multiplier |
|---|---|---|---|
| April 19 1992 | 45 | 45 | none |
| November 2 1997 | 49 | 42 | none |
| March 4 2001 | 49 | 42 | 1–5 |
| October 6 2002 | 53 | 42 | 2–5 |
| August 28 2005 | 55 | 42 | 2–5 |
A promotion from March 2 through March 29 2006, replaced one of the four 5x slots on the Power Play wheel with 10x. The 10x multiplier was drawn once, on March 11 2006. The 10x multiplier returned in April 2007; again, it came up one time. The 10x space is expected to return again in 2008.
The smaller Hot Lotto introduced its Sizzler on January 3, 2008; non-jackpot prizes are automatically tripled when the option is selected. (As of February 28, 2008, the Sizzler is available in 11 of the 13 Hot Lotto jurisdictions.)
Payout is according to the following:
| Matches | Payoff | Odds of winning[2] |
|---|---|---|
| Zero numbers, plus Powerball | $ 3 | 1 in 69 [3] |
| 1 number, plus Powerball | $ 4 | 1 in 127 |
| 2 numbers, plus Powerball | $ 7 | 1 in 745 |
| 3 numbers | $ 7 | 1 in 291 |
| 3 numbers, plus Powerball | $ 100 | 1 in 11,927 |
| 4 numbers | $ 100 | 1 in 14,254 |
| 4 numbers, plus Powerball | $ 10,000 | 1 in 584,432 |
| All 5 numbers | $ 200,000 | 1 in 3,563,609 |
| All 5 numbers, plus Powerball | Jackpot | 1 in 146,107,962 |
Overall odds of winning a prize are 1 in 36.61.
Jackpot winners have the option of receiving an annuity prize or a single lump sum cash payment. The minimum jackpot prize is a $15 million annuity disbursed in 30 payments over 29 years. When the jackpot rolls over, it increases by at least $5 million (e.g. $20 million after one roll.) The lump sum payment is typically approximately half the annuity value. The 30 annuity payments are not equal but based on an increasing rate schedule. For example, the first annual gross annuity payment on the base $15 million jackpot would be approximately $267,000 while the final payment would be approximately $834,000.
Generally, Powerball jackpot winners do not have to choose cash or annuity until after claiming (then they have 60 days to do so.) However, at least in Missouri, the 60-day clock starts with the drawing, so a Missouri Lottery Powerball winner who wishes to take the lump sum needs to make plans right away to claim their prize. Powerball winners, including the jackpot, must claim their prizes within a period ranging from 90 days to one year, depending on the rules of the MUSL member where the ticket was bought.
When the cash option began in November 1997, all Powerball players had to choose, when buying a ticket, whether they wished to receive a jackpot prize in lump sum or (at the time) 25 annual payments. About a year later, a new Federal law no longer required the cash/annuity choice to be made in advance. The MUSL members then phased in the new regulations.
Powerball drawings are held every Wednesday and Saturday (days following Mega Millions drawings) at MUSL's headquarters in Urbandale, Iowa, normally at 10:59 p.m. Eastern Time (9:59 p.m. Central.) Drawings are occasionally scheduled at remote locations; when this occurs, the time may be adjusted, but the day remains the same. The results of drawings are not official until they are audited by the accounting firm LWBJ, LLP.
Machines used
Two machines are used in this game. The balls are mixed by a turntable at the bottom of the machine that propels the balls around the chamber, then when the machine selects a ball, the turntable slows to catch a ball, sends it up the shaft, and then down the rail to the display.
Winning expectation
Because the quoted jackpot amount is paid as an annuity over 29 years, its immediate cash value to the winner is close to, but less than, half. The actual ratio depends on projected interest rates and other factors. They start with the cash value and calculate the advertised Jackpot amount from that. [3]
When the actual Jackpot is $200M, a player's winning expectation is -14% if no one else is playing. This is the best scenario for the player because the winning will not be diluted in sharing. The expectation of -14% means that the player will lose about 14 cents on a $1 ticket, on average. The player will lose more in reality because others are also playing.
The player's expectation gets better when the jackpot becomes higher. If the jackpot is $400M, a player's winning expectation becomes 54% before tax. If the jackpot is $30M, a player's winning expectation becomes -72%. The break even point is for the jackpot to be $242M, in which case the player loses no more than the tax paid. All these numbers are based on the best scenario in which no other players are sharing the prize.
With the jackpot at various levels, if a player pays $1, the net expectation is shown in the following table:
| Jackpot (approximate) | Cash Value | Winning Expectation |
|---|---|---|
| $30M | $15M | $-0.72 |
| $50M | $25M | $-0.66 |
| $100M | $50M | $-0.48 |
| $150M | $75M | $-0.31 |
| $200M | $100M | $-0.14 |
| $242M | $121M | $0 |
| $300M | $150M | $0.20 |
| $350M | $175M | $0.37 |
| $400M | $200M | $0.54 |
Odds decrease, payouts increase
On August 28, 2005, the game was modified to provide larger jackpots and faster jackpot pool growth. The main pool of numbers was increased from 53 to 55 and jackpots now begin at $15 million rather than $10 million. The Powerball number pool remains 42.
Odds of picking the jackpot winning numbers decreased to 1:146.1 million. Overall odds of winning a prize increased slightly to 1:36.61.
Some lower tier prizes also increased. The second tier prize increased from $100,000 to $200,000 and the third tier prize doubled to $10,000.
Largest payoffs
On February 18, 2006, the jackpot worth $365 million was won by a single ticket sold in Lincoln, Nebraska. That single ticket was shared by eight meat plant workers. This is the largest Powerball prize (per ticket).
A grand prize won on October 19, 2005 worth $340 million was awarded to the West family of Jacksonville, Oregon. The family won less than two months after the rules were changed to promote larger payouts. Steve West, who purchased the ticket, put in $20 for tickets, along with another $20 from his in-laws. The family planned to split the prize among themselves.
Prior to the $340 million winner, Jack Whittaker of West Virginia was the claimant to the biggest jackpot. He won $314 million on Christmas Day, 2002.
On August 25, 2007, a jackpot worth $314 million was won by a retired auto worker from Ohio.
Fortune cookie payout
The Powerball drawing of the March 30, 2005 game produced an unprecedented 110 second-place winners, all of whom picked the first five numbers correctly, but not the Powerball number. The total came out to $19.4 million in unexpected payouts; 89 tickets won $100,000, and the other 21 tickets won $500,000 due to the Power Play multiplier option.
Powerball officials initially suspected fraud, but it turned out that all the winners received their numbers from fortune cookies made by Wonton Food Inc., a fortune cookie factory in Long Island City, Queens, New York. The factory had printed the five regular numbers (22, 28, 32, 33, and 39) on thousands of fortunes. The sixth number in the fortune, 40, did not match the Powerball number, 42. None of the employees of Wonton Food played those numbers.
Participating states and territories
Arizona, Connecticut, Colorado, Delaware, District of Columbia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, West Virginia, Wisconsin, and the U.S. Virgin Islands.
The minimum age to play Powerball is 18, except in Nebraska (19); Arizona, Iowa, and Louisiana (21).
Powerball winnings are exempt from state income taxes in Delaware,Pennsylvania, South Carolina, and the District of Columbia. There is no state income tax in South Dakota, and only on interest and dividends in New Hampshire and Tennessee. .[4] Winnings from tickets purchased across state lines may be subject to tax from the state of purchase (with possible credit for taxes paid to one's own state or vice versa).
Maine started offering the then-Lotto*America in 1990, but dropped out of MUSL two years later, when Powerball began. Only in 2004 did Maine begin selling Powerball tickets.
Georgia left Powerball in 1996 to join the Big Game (now Mega Millions), the other major US multi-state lottery.
In 1998, Florida was given permission by the state government to join a multi-state game. It was set to offer Powerball; however, in early 1999, the new governor, Jeb Bush, prevented Florida from joining, since he believed Powerball would hurt the state's existing lottery games. Currently, Florida is the only lottery state that does not participate in either Powerball or Mega Millions.
California never had any intention of offering Powerball; however, it joined MUSL since there was a planned "international" lottery game; but it never got off the ground. It currently participates in Mega Millions.
Another matrix change?
The South Carolina website mentions that a potential Powerball format change was discussed at a state lottery meeting[4] on October 4, 2007. Among the items mentioned was "guaranteeing" that any game matching the first five numbers where the PowerPlay option is exercised would win the player (at least) $1 million.
Licensed products
In 2006 WMS Gaming released a range of slot machines under the Powerball brand name.
Vista Sidebar Gadgets
In 2007 The Oregon Lottery released a new Windows Vista Sidebar gadget which relays the winning numbers for Powerball in live time. The gadget also provides large jackpot announcements. Oregon Lottery
References
- April Witt (January 30, 2005). "Rich Man, Poor Man". The Washington Post Magazine, page 14.
- Jennifer 8. Lee (May 11, 2005). "Who Needs Giacomo? Bet on the Fortune Cookie". The New York Times. [5]
- Press release detailing March 30, 2005 payout.
- usamega.com Powerball Jackpot Analysis
- Ed Stanek's contribution