10 ms·

There Was a Texas Lottery Arbitrage

244 points by ioblomov 2y ago

ioblomov 2y ago
https://archive.ph/DOCG0 https://archive.ph/DOCG0
WorkerBee28474 2y ago
If you're into this, you may enjoy reading about Joan Ginther, a statistician and multiple lottery winner. Her Wikipedia article is sadly short [0], but there are a number of other sadly short and poorly sourced articles around the web to augment it. [0] https://en.wikipedia.org/wiki/Joan_R._Ginther https://en.wikipedia.org/wiki/Joan_R._Ginther
- ceejayoz 2y ago
  There's also a film about a similar scenario: https://en.wikipedia.org/wiki/Jerry_%26_Marge_Go_Large https://en.wikipedia.org/wiki/Jerry_%26_Marge_Go_Large (based on https://highline.huffingtonpost.com/articles/en/lotto-winners/ https://highline.huffingtonpost.com/articles/en/lotto-winner...)
- imajoredinecon 2y ago
  Google turned up this Harper’s feature which is pretty good: https://courses.washington.edu/psy315/pdf/HarpersMagazine_Luckiest_Woman_on_Earth.pdf https://courses.washington.edu/psy315/pdf/HarpersMagazine_Lu...
  - jamesfinlayson 2y ago
    Long article but the likeliest scenario in the article is that the has studied the printing sheet location and sales time distribution of winning tickets to work out when they will appear on the market, then buys up all the newly issued scratchies from compliant shop owners.
- stavros 2y ago
  This doesn't say anything about how she did it, was it just luck or was there some method?
mattlondon 2y ago
I've heard these stories before. What happens if there is more than one winning ticket? In the UK they just divide the jackpot up between the winners so you might get less. I guess that is the risk.
- deleted 2y ago
  [deleted]
- martinky24 2y ago
  Did you read the article? This is literally covered _extensively_ in the first paragraph.
  - lern_too_spel 2y ago
    It's missing some prior work. When the jackpot gets higher, more people play, and the number of winners expected to split the prize increases. You can do the EV calculation using historical purchase data. https://phaethonprime.wordpress.com/2015/10/24/mega-millions-isnt-even-a-reasonable-rip-off/ https://phaethonprime.wordpress.com/2015/10/24/mega-millions...
    - hinkley 2y ago
      But a fraction of the ticket sales are also rolled back into the lottery. These people won when it was almost 4:1 payout.
  - mattlondon 2y ago
    It was behind a pay wall, nothing apart from the first sentence or two.
- gxs 2y ago
  He quite literally addresses this in the article
deleted 2y ago
[deleted]
adiabatichottub 2y ago
> In April 2023, an entity called Rook TX effectively purchased the jackpot, collecting a one-time payment of $57.8 million, by acquiring virtually all of the 25.8 million possible number combinations. The operation was planned in Malta and funded by a London betting company. It was carried out by four Texas retailers, all connected to online sales companies called couriers. Well, as the saying goes, "It takes money to make money."
- smelendez 2y ago
  Lottery couriers are companies that will buy and scan lottery tickets for you for a fee. Most of the time, they're not actually doing much courier work. If you win a small amount, they'll cash the ticket for you and credit it to your account, and if you win a big enough amount that you have to cash it in directly with the state, they'll actually deliver you the winning ticket. It's basically a workaround for restrictions on online lottery sales. I'm not sure how states should handle online lottery gambling—there are a lot of considerations around addiction, potential fraud, money laundering, and erosion of retailer lottery revenue and shopper base—but I don't think this is it.
  - ryoshu 2y ago
    A friend is working on a system that automates scratch off tickets and uses computer vision to detect winners. Not sure what the end product is.
    - withinboredom 2y ago
      why.... not just give the user the ability to see it and evaluate? Why the AI?
      - 0cf8612b2e1e 2y ago
        I assume the opportunity is doing this in huge volume. Getting a cheap computer to make the initial call is faster than relying on teams of humans.
kubectl_h 2y ago
> “We fully expected that they would laugh at us and say, ‘Well, no, of course you can’t do this,’” he said. But the company agreed it would at least sound out the lottery agency. > “We were very surprised that the answer was yes,” Potts added. “As a person and a lottery player, I cannot believe they said yes. I was shocked.” Well Texas bills itself as the most business friendly state in the country. I'm not surprised that extends to some shadowy Maltese concern effectively purchasing the lottery jackpot at 25 cents on the dollar.
- AlexandrB 2y ago
  I don't get why you shouldn't be allowed to do this and it's not the first time it has happened either[1]. "Investors" in this kind of thing are still taking a small risk that they might have to share the winnings with another winning ticket. [1] http://investpost.org/mutual-funds/group-invests-5-million-to-hedge-bets-in-lottery/ http://investpost.org/mutual-funds/group-invests-5-million-t...
  - bryanlarsen 2y ago
    If normal lottery ticket buyers knew this sort of thing was going on, they'd likely stop buying tickets.
    - byteknight 2y ago
      I mean the near-impossible odds weren't enough to dissuade them, I doubt some more statistics will do it.
      - bryanlarsen 2y ago
        Many people care less about the odds and more about feeling that things are fair, that they are the same for everyone.
        bruce511 2y ago
        I know "fairness" is a virtue we teach to children, but honestly there is nothing fair about any part of life. Where you are born, what ethnicity you are, how rich your parents are, how healthy, athletic, brainy, beautiful you are, what you eat, how you live, nothing in any part of your life is "fair". So sure, play the lottery if you like, but don't pretend it's fair. Indeed the unfairness of the winning is entirely the point of it. Of course if you are playing the lottery and dreaming of a better life, you already know how unfair life really is.
hinkley 2y ago
That couple in New England that was doing it probably made more money off of selling their story to Hollywood than they did off the lottery tickets. The amount of time they were putting into their “scheme” sounds brutal. I think a lot of people here could have netted more money per hour by studying up to pass a FAANG interview instead of buying lottery tickets one at a time.
- danielmarkbruce 2y ago
  100%. There are arbs not worth doing all over the place.
  - hinkley 2y ago
    They were making something like $20+ an hour each if I recall correctly. Better than working retail of course but he’d have been better off keeping his career longer.
    - danielmarkbruce 2y ago
      I guess he does get a cool story as mentioned... which isn't nothing in life.
      - hinkley 2y ago
        Some people are really happy doing mundane tasks for hours and hours on end. But I suspect it was the 'stick it to the Man' aspect that made him put in the effort. I'm gonna work really hard to get something for 'nothing'.
        kristianp 2y ago
        And also availability bias. They've thought of a cool scheme, and not thought of anything else they'd want to do more, even if it might pay better. I think this is why some prices on ebay seem unusually low, many on ebay are probably paying themselves less than minimum wage.
danielmarkbruce 2y ago
There are a lot of arbs in the world. Same principle - they take a lot of work to get done. Physical commodities, real estate, etc
waynenilsen 2y ago
A similar case in 2011 https://www.bostonglobe.com/metro/2011/07/30/lottery-game-with-windfall-for-knowing-few/cEWIVs5c0JLnkapxIiMG6J/story.html https://www.bostonglobe.com/metro/2011/07/30/lottery-game-wi...
gxs 2y ago
Hm call me old fashioned, but hearing that this was done by people in Malta backed by people in London sort of broke my heart I get HN isn’t sympathetic to this kind of stuff (ovarian lottery and all that jazz), but I, personally, much rather this have been some kids from a random town in Kansas or something vs pros from other countries Edit: I think you are all confused and acting as if I didn’t understand why this happened or how, I was just making a sentimental lament, but I should know better by now
- SecretDreams 2y ago
  > but I, personally, much rather this have been some kids from a random town in Kansas or something vs pros from other countries Well, that's the rub and ultimate downfall of our current implementation of capitalism. Even if you have a good idea that almost nobody else has yet thought of, you've got to have enough resources to be able to comfortably execute it such that if you fail, your life won't be over. Most of the time, the only people who can do that already have a lot of money. So most innovators and innovation naturally have to come from people that already have money and connections; HOWEVER, there's very little reason to believe only good ideas come from people with money or power. So little Timmy from Kansas might have even thought this was a nifty idea, but Timmy's dad is going to roll his eyes and get back to work. Nobody on the ground is ever going to be able to execute what is a relatively obvious play. Instead, they lose their time-advantage and big Timoteo from Malta comes in for the prize. Worse still, big Timoteo has now accumulated more resources that puts him even further ahead of the pack for future such endeavours that should really need have success tied to starting resources.
- nightpool 2y ago
  Where are "some kids from a random town in Kansas" going to get $24M dollars?
  - jldugger 2y ago
    Maybe they know a guy[1]. [1]: https://www.justice.gov/usao-ks/pr/victims-cryptocurrency-scam-awarded-restitution https://www.justice.gov/usao-ks/pr/victims-cryptocurrency-sc...
jmholla 2y ago
> But in most of modern life, the computer is the main thing, and it is somewhat eccentric to suggest that the computer is wrong. What, the piece of paper that I skimmed and signed and stuck in a drawer is the deal, and not the computer screen that I look at every day? Seems implausible. The contract is just a piece of paper; the computer is real life. What in the world is the author talking about here? Why wouldn't the contract you signed be the contract? And the administrative error is an error in execution of the contract, so of course there's some space for dispute. Without that contract, he wouldn't have shares in the first place. > If you give your CEO options that expire in August 2024, and you put into the computer that they expire in October 2024, then they expire in October 2024. How was he supposed to know that they expired in August? Flipping this around, if the CEO signed a contract saying they expired in December then the system said they expired in October, I would still expect the shares to expire in December. By the author's logic, they would expire in October.
- nightpool 2y ago
  They're talking about the world that most people live in, where lawyers are expensive and bureaucracies are run by computers and people looking at computers. They're saying that 90% of the time, the computer is correct, and people will look at you strangely if you say that "No, my contract with the insurance company says that it has to cover this medication, so your pharmacy has to fill it, regardless of what the insurance's computer system says". Everyone knows that the insurance's computer system has a bug, everybody knows that the medication they're trying to give me should be covered, but nobody is able to fix it.
- stickfigure 2y ago
  Levine is having a bit of fun. Contracts are an agreement between two parties; in other Money Stuffs he's talked about how the written contract is also secondary to the agreement as understood by both parties. The paperwork makes it easier to enforce in court, but you can (even in 2025) still have enforceable contracts with just a handshake.
- compiler-guy 2y ago
  It’s not the author’s logic. It’s the court’s logic. Contracts are messy in the real world. Sorting it out can be tricky. The various doctrines of estoppel are relevant for sorting things out. Of particular pertinence to this case, “conventional estoppel” means that if both parties consistently behave in a certain way that can become an expectation to be relied upon (over-simplified!) In this case, if the guy reasonable relied on the convention that he would be notified when they expired, and wasn’t, then he may have an estoppel claim. There is a large framework around contract law that takes a semester in law school just for the introduction.
spelunker 2y ago
As a side note, my home state also allows online purchasing of lotto tickets through "couriers", which turns out to be a strange workaround that let companies like Lotto.com or Jackpocket operate in some states: https://www.locance.com/blog/what-are-lottery-courier-services-or-lottery-agents/ https://www.locance.com/blog/what-are-lottery-courier-servic...
s1artibartfast 2y ago
It's article is filed under Bloomberg opinion, but I failed to find a common thread or observation has I read to the end. Is this just a weekly Roundup of financial events? About the 23andMe and pharma events were specially interesting. That said, I disagree with Matt interpretation that the computer entry overrode the contract. Arbitrator stipulated compensation based on the contract date, not the computer executed date When someone has 35 million of options, i would expect both parties have some duty to understand the terms. That said, they also have a duty to not misrepresent the contract after the fact. [edit] My primary point is that I didnt see much opinion or rant
- Arcuru 2y ago
  The submission is a link to the daily Matt Levine column where he typically rants his opinions on Finance.
- bryanlarsen 2y ago
  You're one of today's lucky 10,000 by discovering Matt Levine's Money Stuff column. It's a daily column that is almost always as interesting as this one was. https://www.bloomberg.com/account/newsletters/money-stuff?source=NLshare https://www.bloomberg.com/account/newsletters/money-stuff?so...
  - buybackoff 2y ago
    It's not only a column but a daily email. Of 20 unread emails in my inbox 17 are these ones. It's too good to archive without at least skimming through. But it's a longish read and accumulates fast.
    - bryanlarsen 2y ago
      Yes, I should have mentioned that -- the link I posted is a link to subscribe to the email.
  - s1artibartfast 2y ago
    I have read a lot of Matt Lavine, but just remembered it having more editorial analysis. Maybe that is the difference between the daily and other articles?
lenerdenator 2y ago
There's a fine line between this, and the habits of a guy whose wife left him because of his luck with the ponies. That line? Millions of dollars.
impish9208 2y ago
https://news.ycombinator.com/item?id=41799080 https://news.ycombinator.com/item?id=41799080
withinboredom 2y ago
Huh. Reminds me of my favorite idea to "hack" the lottery: 1. get access to a lottery ticket terminal 2. get access to a router firmware in the lottery datacenter en route to the database 3. wait for the query to get the winning numbers from the database 4. hold that packet and submit an INSERT into the database with you as the winning number at a predetermined date/time in the past 5. release the packet to query the database 6. hack the terminal to print your winning ticket with the predetermined date/time in the past 7. profit? It probably doesn't work, but it was fun thinking about when I was younger.
- gruez 2y ago
  >2. get access to a router firmware in the lottery datacenter en route to the database Seems non-trivial given that the database server is likely to be in the same datacenter/rack/physical machine. If you have this much access you might as well plant a backdoor in the server and tamper with the database however you want. >3. wait for the query to get the winning numbers from the database Are lottery winners determined immediately after they close? I thought they did a number picking ceremony by picking out literal number balls from a tumbler?
  - bombcar 2y ago
    They usually stop sale an hour before the ball-picking, at least around here. I assume that hour is for all the "picks" to be transmitted up to them for record keeping.
  - jamesfinlayson 2y ago
    In Australia at least the balls are drawn an hour later. No idea about the computer RNG games though.
- immibis 2y ago
  In the Ethereum blockchain, some people do exactly this - for more details, search "miner-extractable value". I don't know whether it still applies after the transition to proof-of-stake.
AcerbicZero 2y ago
The lottery is a tax on people with poor judgement skills and I'm not comfortable with the state taking direct advantage of its vulnerable citizens.
- k__ 2y ago
  Better than a private entity.
  - bell-cot 2y ago
    Especially if said "private entity" happens to be the mob. My understanding is that the proliferation of casinos, state lotteries, etc. has been very bad for organized crime's traditional business model.
  - tedsanders 2y ago
    What's the evidence that it's better than a private entity? State lotteries pay out ~60% on average, compared to ~90%+ for casinos. Not apples to apples, but it seems like competition does shrink profit margins, for the benefit of the buyer. It's not clear to me which is better, but I'd be curious to read good analyses, if anyone has a pointer.
    - dml2135 2y ago
      I'm pretty sure that the payout % for casinos is determined by regulations in most, if not all cases, and not by market dynamics.
      - s1artibartfast 2y ago
        I'd be interested to see numbers on that. Vegas has a 75% minimum payout on slot machines. Table games have their own return. Roulette, for example has a 98% return. Casinos definitely compete on table rake for poker
    - autoexec 2y ago
      > What's the evidence that it's better than a private entity? In this case, texas voters can demand the changes to prevent some company from buying all the numbers again. A private entity wouldn't be accountable to the public for anything. We have countless examples of private companies screwing over people both in secret or openly no matter how much the public wishes that they would stop.
Carrok 2y ago
[Offtopic] It drives me crazy that government sponsored lotteries are legal, but me playing a round of poker in the basement with a few friends is technically illegal. Nevermind sports betting apps being legal and poker apps not.
- eMPee584 2y ago
  At least here in Germany, half of sale proceedings of state-licensed lotteries go into social causes (our open source ecology germany e.v. managed to get several projects funded through this). Also, they are obliged to check each player against a black list of gambling addicts, which unlicensed online gambling venues probably don't give a toss about.
  - vuln 2y ago
    Yeah the US States claim that the money goes to Education yet somehow ends up in the general slush fund in most cases.
    - IX-103 2y ago
      It's not that the money from the lottery ends up in a slush fund, it's that the government cuts funding for education by the amount that it gets from the lottery. The money from the cuts gives the government the same amount of "clean" money to do whatever they want with.
      - cool_dude85 2y ago
        Money is fungible and exactly this trick is common. Best to think of the education funding as a minimum below which funding cannot be cut. In Florida, where I live, it actually funds a specific scholarship program, so it really does have the effect of making the program difficult to slash.
  - afh1 2y ago
    Your car makers and economy sure are doing great.
fsckboy 2y ago
the term they meant is texas lottery "riskless arbitrage". Buying a whole pizza, then standing in front of the pizza shop shelling the slices for a net profit is arbitrage. but it's risky because you might not be able to sell enough of them (before they get cold, say) to earn back your investment. when you talk about an arbitrage that is guaranteed profit, that is a riskless arbitrage.
- sincerely 2y ago
  Really? Doesn’t that describe every kind of store where you don’t create the product yourself as an arbitrage? You’re just buying items from a supplier and reselling to make a profit
  - felizuno 2y ago
    For sure. Buying wholesale and selling retail is one of the most common/accessible windows of arbitrage you can find.
    - fsckboy 2y ago
      probably best to understand the way people use the term as a risk spectrum, from riskless arbitrage where there is no window for losing money, through say a real estate deal where you find a seller at a good price, and you find a buyer at the market price, and you insert yourself in the middle (a perfect houseflip) even though you don't have the capital to suffer the loss if things get screwed up, to an antique shop that buys on speculation and sells to reliable clients. A pawn shop is arbitrage too. generally people mean by arbitrage that you enter into a transaction having both a seller and a buyer in mind, or you have two liquid markets with different prices.
    - solatic 2y ago
      Buying wholesale and selling retail isn't arbitrage. Wholesale pricing is cheaper precisely because it is a bulk price. There is an overhead to selling individual units. A retail operator adds value by introducing individual unit liquidity, with the price premium of the individual unit offsetting the risks involved in paying the fixed costs of retail (rent etc.), not selling all the inventory, and having enough left over for a profit.
deleted 2y ago
[deleted]
brendanfinan 2y ago
This arbitrage is even more profitable if you only buy the lucky numbers.
_trampeltier 2y ago
Kind of the same did happen in Switzerland this January. https://www.tagesanzeiger.ch/loterie-romande-serial-players-koennten-ihre-wette-gewonnen-haben-244058131900 https://www.tagesanzeiger.ch/loterie-romande-serial-players-...
- tzs 2y ago
  I wonder if anyone is keeping a list of all the times this has happened? I know that its not something new, because 30 years ago when I was in law school one of the cases studied in my class on transnational taxation was that of an Australian group (if I'm remembering the right country...) that tried to buy every possible ticket in a US lottery. My recollection is that they only ended up getting something like 90% of the possible numbers but that was enough to get the top prizes and questions arose on how that should be taxed and whether the cost of the tickets was deductible.
  - tjalfi 2y ago
    You're thinking of Stefan Mandel's International Lotto Fund[0]. They tried to buy every ticket in the Virginia state lottery in 1992. They won the money, but IIRC there were years of litigation. [0] http://investpost.org/mutual-funds/group-invests-5-million-to-hedge-bets-in-lottery/ http://investpost.org/mutual-funds/group-invests-5-million-t...
  - thaumasiotes 2y ago
    > questions arose on how that should be taxed and whether the cost of the tickets was deductible What were the questions? What would the case be that cost of tickets shouldn't be deductible?
    - ascorbic 2y ago
      In many countries, gambling winnings are not taxed. I'm guessing the argument was that this wasn't really gambling.
    - tzs 2y ago
      As I said I was going from memory from a class 30 years ago. Looking at the case again, I see that the dispute was on whether tax should be withheld in the US. The tax treaty between the US and Australia said that the US would not tax the winnings. The winners had filed the appropriate form with the IRS to invoke the treaty and be exempt from tax. The state lottery commission automatically withholds federal and state taxes, and refused to make an exception for the Australians. The Australians sued and a district court issued an injunction to stop the state from withholding those taxes. The federal and state governments appealed. The appellate court reversed and removed the injunction. It turns out there is a law that prohibits courts from issuing injunctions to stop tax collection (and withholding counts as collection) so the district court overstepped its jurisdiction. What you are supposed to do if you think a tax is improperly applied is pay it and then seek a refund.
waldrews 2y ago
Ah, so if doing this once can net tens of millions, all we have to do is repeat the process a few million times, and the national debt is covered. That's where automation comes in.
paulsutter 2y ago
The key here is that only 1 million tickets per week are sold, which is the reason the company could estimate a probability that others buy the winning ticket forcing a split Jackpots higher than the probability of winning happen so the time, but thats not enough information to take the risk
WatchDog 2y ago
I used to work for the Australian parimutuel(aka tote or pool)[0] betting operator. All the proceeds for a race are placed in a pool, the operator deducts a percentage of pool as a takeout, and the rest is divided among the winners, or. is carried over into a jackpot. We had special bulk betting integrations for quantitative bettors, and even offered rebates on the takeout revenue, it's not secret, although it's not widely publicised.[1] There are stories of traders that have made lots of money betting in parimutuel markets[1] [0]: https://en.wikipedia.org/wiki/Parimutuel_betting https://en.wikipedia.org/wiki/Parimutuel_betting [1]: https://www.sportstradingnetwork.com/article/rebates-global-horse-race-betting/ https://www.sportstradingnetwork.com/article/rebates-global-... [2]: https://www.bloomberg.com/news/features/2018-05-03/the-gambler-who-cracked-the-horse-racing-code https://www.bloomberg.com/news/features/2018-05-03/the-gambl...
- jamesfinlayson 2y ago
  Which one? What became UBet or the one that is still TAB?
  - WatchDog 2y ago
    Tabcorp
- femto 2y ago
  One of the standouts being the syndicate run by David Walsh (of MONA fame) and Zeljko Ranogajec. They made money because the rebates swung the odds in their favour [1]. My take is that: the syndicate wins because the odds were swung in their favour. The tote wins because even with the discounted percentage the increased pool size offset the rebate and made them more money. The rest of the mug punters lost since the syndicate was winning a portion of the pool they would have otherwise won. The rebates are a mechanism to reliably transfer additional money from mug punters to the tote via an enabling middleman (the syndicate). [1] https://www.perthturftalk.com.au/discussion/discussion/11724/an-incredible-story-about-rebates-etc https://www.perthturftalk.com.au/discussion/discussion/11724...
  - 2y ago
charlieyu1 2y ago
I guess I’ll never understand why there are so many restrictions in buying lottery tickets, because in Hong Kong all you need do to buy all the numbers is a single transaction and paying enough money. And it is never a profitable strategy, big jackpots always attract a huge crowd and most of the time it is split at least 4 way
- Panzer04 2y ago
  This feels like a decent answer. A bit like allowing inssder trading, although that has many more problems XD
AGorilla 2y ago
[dead]

244 points by ioblomov 2y ago

https://archive.ph/DOCG0 https://archive.ph/DOCG0

If you're into this, you may enjoy reading about Joan Ginther, a statistician and multiple lottery winner. Her Wikipedia article is sadly short [0], but there are a number of other sadly short and poorly sourced articles around the web to augment it. [0] https://en.wikipedia.org/wiki/Joan_R._Ginther https://en.wikipedia.org/wiki/Joan_R._Ginther

ceejayoz 2y ago
There's also a film about a similar scenario: https://en.wikipedia.org/wiki/Jerry_%26_Marge_Go_Large https://en.wikipedia.org/wiki/Jerry_%26_Marge_Go_Large (based on https://highline.huffingtonpost.com/articles/en/lotto-winners/ https://highline.huffingtonpost.com/articles/en/lotto-winner...)
imajoredinecon 2y ago
Google turned up this Harper’s feature which is pretty good: https://courses.washington.edu/psy315/pdf/HarpersMagazine_Luckiest_Woman_on_Earth.pdf https://courses.washington.edu/psy315/pdf/HarpersMagazine_Lu...
- jamesfinlayson 2y ago
  Long article but the likeliest scenario in the article is that the has studied the printing sheet location and sales time distribution of winning tickets to work out when they will appear on the market, then buys up all the newly issued scratchies from compliant shop owners.
stavros 2y ago
This doesn't say anything about how she did it, was it just luck or was there some method?

mattlondon 2y ago

I've heard these stories before. What happens if there is more than one winning ticket? In the UK they just divide the jackpot up between the winners so you might get less. I guess that is the risk.

deleted 2y ago
[deleted]
martinky24 2y ago
Did you read the article? This is literally covered _extensively_ in the first paragraph.
- lern_too_spel 2y ago
  It's missing some prior work. When the jackpot gets higher, more people play, and the number of winners expected to split the prize increases. You can do the EV calculation using historical purchase data. https://phaethonprime.wordpress.com/2015/10/24/mega-millions-isnt-even-a-reasonable-rip-off/ https://phaethonprime.wordpress.com/2015/10/24/mega-millions...
  - hinkley 2y ago
    But a fraction of the ticket sales are also rolled back into the lottery. These people won when it was almost 4:1 payout.
- mattlondon 2y ago
  It was behind a pay wall, nothing apart from the first sentence or two.
gxs 2y ago
He quite literally addresses this in the article

deleted 2y ago

[deleted]

adiabatichottub 2y ago

> In April 2023, an entity called Rook TX effectively purchased the jackpot, collecting a one-time payment of $57.8 million, by acquiring virtually all of the 25.8 million possible number combinations. The operation was planned in Malta and funded by a London betting company. It was carried out by four Texas retailers, all connected to online sales companies called couriers. Well, as the saying goes, "It takes money to make money."

smelendez 2y ago
Lottery couriers are companies that will buy and scan lottery tickets for you for a fee. Most of the time, they're not actually doing much courier work. If you win a small amount, they'll cash the ticket for you and credit it to your account, and if you win a big enough amount that you have to cash it in directly with the state, they'll actually deliver you the winning ticket. It's basically a workaround for restrictions on online lottery sales. I'm not sure how states should handle online lottery gambling—there are a lot of considerations around addiction, potential fraud, money laundering, and erosion of retailer lottery revenue and shopper base—but I don't think this is it.
- ryoshu 2y ago
  A friend is working on a system that automates scratch off tickets and uses computer vision to detect winners. Not sure what the end product is.
  - withinboredom 2y ago
    why.... not just give the user the ability to see it and evaluate? Why the AI?
    - 0cf8612b2e1e 2y ago
      I assume the opportunity is doing this in huge volume. Getting a cheap computer to make the initial call is faster than relying on teams of humans.

kubectl_h 2y ago

> “We fully expected that they would laugh at us and say, ‘Well, no, of course you can’t do this,’” he said. But the company agreed it would at least sound out the lottery agency. > “We were very surprised that the answer was yes,” Potts added. “As a person and a lottery player, I cannot believe they said yes. I was shocked.” Well Texas bills itself as the most business friendly state in the country. I'm not surprised that extends to some shadowy Maltese concern effectively purchasing the lottery jackpot at 25 cents on the dollar.

AlexandrB 2y ago
I don't get why you shouldn't be allowed to do this and it's not the first time it has happened either[1]. "Investors" in this kind of thing are still taking a small risk that they might have to share the winnings with another winning ticket. [1] http://investpost.org/mutual-funds/group-invests-5-million-to-hedge-bets-in-lottery/ http://investpost.org/mutual-funds/group-invests-5-million-t...
- bryanlarsen 2y ago
  If normal lottery ticket buyers knew this sort of thing was going on, they'd likely stop buying tickets.
  - byteknight 2y ago
    I mean the near-impossible odds weren't enough to dissuade them, I doubt some more statistics will do it.
    - bryanlarsen 2y ago
      Many people care less about the odds and more about feeling that things are fair, that they are the same for everyone.
      - bruce511 2y ago
        I know "fairness" is a virtue we teach to children, but honestly there is nothing fair about any part of life. Where you are born, what ethnicity you are, how rich your parents are, how healthy, athletic, brainy, beautiful you are, what you eat, how you live, nothing in any part of your life is "fair". So sure, play the lottery if you like, but don't pretend it's fair. Indeed the unfairness of the winning is entirely the point of it. Of course if you are playing the lottery and dreaming of a better life, you already know how unfair life really is.

hinkley 2y ago

That couple in New England that was doing it probably made more money off of selling their story to Hollywood than they did off the lottery tickets. The amount of time they were putting into their “scheme” sounds brutal. I think a lot of people here could have netted more money per hour by studying up to pass a FAANG interview instead of buying lottery tickets one at a time.

danielmarkbruce 2y ago
100%. There are arbs not worth doing all over the place.
- hinkley 2y ago
  They were making something like $20+ an hour each if I recall correctly. Better than working retail of course but he’d have been better off keeping his career longer.
  - danielmarkbruce 2y ago
    I guess he does get a cool story as mentioned... which isn't nothing in life.
    - hinkley 2y ago
      Some people are really happy doing mundane tasks for hours and hours on end. But I suspect it was the 'stick it to the Man' aspect that made him put in the effort. I'm gonna work really hard to get something for 'nothing'.
      - kristianp 2y ago
        And also availability bias. They've thought of a cool scheme, and not thought of anything else they'd want to do more, even if it might pay better. I think this is why some prices on ebay seem unusually low, many on ebay are probably paying themselves less than minimum wage.

danielmarkbruce 2y ago

There are a lot of arbs in the world. Same principle - they take a lot of work to get done. Physical commodities, real estate, etc

waynenilsen 2y ago

A similar case in 2011 https://www.bostonglobe.com/metro/2011/07/30/lottery-game-with-windfall-for-knowing-few/cEWIVs5c0JLnkapxIiMG6J/story.html https://www.bostonglobe.com/metro/2011/07/30/lottery-game-wi...

gxs 2y ago

Hm call me old fashioned, but hearing that this was done by people in Malta backed by people in London sort of broke my heart I get HN isn’t sympathetic to this kind of stuff (ovarian lottery and all that jazz), but I, personally, much rather this have been some kids from a random town in Kansas or something vs pros from other countries Edit: I think you are all confused and acting as if I didn’t understand why this happened or how, I was just making a sentimental lament, but I should know better by now

SecretDreams 2y ago
> but I, personally, much rather this have been some kids from a random town in Kansas or something vs pros from other countries Well, that's the rub and ultimate downfall of our current implementation of capitalism. Even if you have a good idea that almost nobody else has yet thought of, you've got to have enough resources to be able to comfortably execute it such that if you fail, your life won't be over. Most of the time, the only people who can do that already have a lot of money. So most innovators and innovation naturally have to come from people that already have money and connections; HOWEVER, there's very little reason to believe only good ideas come from people with money or power. So little Timmy from Kansas might have even thought this was a nifty idea, but Timmy's dad is going to roll his eyes and get back to work. Nobody on the ground is ever going to be able to execute what is a relatively obvious play. Instead, they lose their time-advantage and big Timoteo from Malta comes in for the prize. Worse still, big Timoteo has now accumulated more resources that puts him even further ahead of the pack for future such endeavours that should really need have success tied to starting resources.
nightpool 2y ago
Where are "some kids from a random town in Kansas" going to get $24M dollars?
- jldugger 2y ago
  Maybe they know a guy[1]. [1]: https://www.justice.gov/usao-ks/pr/victims-cryptocurrency-scam-awarded-restitution https://www.justice.gov/usao-ks/pr/victims-cryptocurrency-sc...

jmholla 2y ago

> But in most of modern life, the computer is the main thing, and it is somewhat eccentric to suggest that the computer is wrong. What, the piece of paper that I skimmed and signed and stuck in a drawer is the deal, and not the computer screen that I look at every day? Seems implausible. The contract is just a piece of paper; the computer is real life. What in the world is the author talking about here? Why wouldn't the contract you signed be the contract? And the administrative error is an error in execution of the contract, so of course there's some space for dispute. Without that contract, he wouldn't have shares in the first place. > If you give your CEO options that expire in August 2024, and you put into the computer that they expire in October 2024, then they expire in October 2024. How was he supposed to know that they expired in August? Flipping this around, if the CEO signed a contract saying they expired in December then the system said they expired in October, I would still expect the shares to expire in December. By the author's logic, they would expire in October.

nightpool 2y ago
They're talking about the world that most people live in, where lawyers are expensive and bureaucracies are run by computers and people looking at computers. They're saying that 90% of the time, the computer is correct, and people will look at you strangely if you say that "No, my contract with the insurance company says that it has to cover this medication, so your pharmacy has to fill it, regardless of what the insurance's computer system says". Everyone knows that the insurance's computer system has a bug, everybody knows that the medication they're trying to give me should be covered, but nobody is able to fix it.
stickfigure 2y ago
Levine is having a bit of fun. Contracts are an agreement between two parties; in other Money Stuffs he's talked about how the written contract is also secondary to the agreement as understood by both parties. The paperwork makes it easier to enforce in court, but you can (even in 2025) still have enforceable contracts with just a handshake.
compiler-guy 2y ago
It’s not the author’s logic. It’s the court’s logic. Contracts are messy in the real world. Sorting it out can be tricky. The various doctrines of estoppel are relevant for sorting things out. Of particular pertinence to this case, “conventional estoppel” means that if both parties consistently behave in a certain way that can become an expectation to be relied upon (over-simplified!) In this case, if the guy reasonable relied on the convention that he would be notified when they expired, and wasn’t, then he may have an estoppel claim. There is a large framework around contract law that takes a semester in law school just for the introduction.

spelunker 2y ago

As a side note, my home state also allows online purchasing of lotto tickets through "couriers", which turns out to be a strange workaround that let companies like Lotto.com or Jackpocket operate in some states: https://www.locance.com/blog/what-are-lottery-courier-services-or-lottery-agents/ https://www.locance.com/blog/what-are-lottery-courier-servic...

s1artibartfast 2y ago

It's article is filed under Bloomberg opinion, but I failed to find a common thread or observation has I read to the end. Is this just a weekly Roundup of financial events? About the 23andMe and pharma events were specially interesting. That said, I disagree with Matt interpretation that the computer entry overrode the contract. Arbitrator stipulated compensation based on the contract date, not the computer executed date When someone has 35 million of options, i would expect both parties have some duty to understand the terms. That said, they also have a duty to not misrepresent the contract after the fact. [edit] My primary point is that I didnt see much opinion or rant

Arcuru 2y ago
The submission is a link to the daily Matt Levine column where he typically rants his opinions on Finance.
bryanlarsen 2y ago
You're one of today's lucky 10,000 by discovering Matt Levine's Money Stuff column. It's a daily column that is almost always as interesting as this one was. https://www.bloomberg.com/account/newsletters/money-stuff?source=NLshare https://www.bloomberg.com/account/newsletters/money-stuff?so...
- buybackoff 2y ago
  It's not only a column but a daily email. Of 20 unread emails in my inbox 17 are these ones. It's too good to archive without at least skimming through. But it's a longish read and accumulates fast.
  - bryanlarsen 2y ago
    Yes, I should have mentioned that -- the link I posted is a link to subscribe to the email.
- s1artibartfast 2y ago
  I have read a lot of Matt Lavine, but just remembered it having more editorial analysis. Maybe that is the difference between the daily and other articles?

lenerdenator 2y ago

There's a fine line between this, and the habits of a guy whose wife left him because of his luck with the ponies. That line? Millions of dollars.

impish9208 2y ago

https://news.ycombinator.com/item?id=41799080 https://news.ycombinator.com/item?id=41799080

withinboredom 2y ago

Huh. Reminds me of my favorite idea to "hack" the lottery: 1. get access to a lottery ticket terminal 2. get access to a router firmware in the lottery datacenter en route to the database 3. wait for the query to get the winning numbers from the database 4. hold that packet and submit an INSERT into the database with you as the winning number at a predetermined date/time in the past 5. release the packet to query the database 6. hack the terminal to print your winning ticket with the predetermined date/time in the past 7. profit? It probably doesn't work, but it was fun thinking about when I was younger.

gruez 2y ago
>2. get access to a router firmware in the lottery datacenter en route to the database Seems non-trivial given that the database server is likely to be in the same datacenter/rack/physical machine. If you have this much access you might as well plant a backdoor in the server and tamper with the database however you want. >3. wait for the query to get the winning numbers from the database Are lottery winners determined immediately after they close? I thought they did a number picking ceremony by picking out literal number balls from a tumbler?
- bombcar 2y ago
  They usually stop sale an hour before the ball-picking, at least around here. I assume that hour is for all the "picks" to be transmitted up to them for record keeping.
- jamesfinlayson 2y ago
  In Australia at least the balls are drawn an hour later. No idea about the computer RNG games though.
immibis 2y ago
In the Ethereum blockchain, some people do exactly this - for more details, search "miner-extractable value". I don't know whether it still applies after the transition to proof-of-stake.

AcerbicZero 2y ago

The lottery is a tax on people with poor judgement skills and I'm not comfortable with the state taking direct advantage of its vulnerable citizens.

k__ 2y ago
Better than a private entity.
- bell-cot 2y ago
  Especially if said "private entity" happens to be the mob. My understanding is that the proliferation of casinos, state lotteries, etc. has been very bad for organized crime's traditional business model.
- tedsanders 2y ago
  What's the evidence that it's better than a private entity? State lotteries pay out ~60% on average, compared to ~90%+ for casinos. Not apples to apples, but it seems like competition does shrink profit margins, for the benefit of the buyer. It's not clear to me which is better, but I'd be curious to read good analyses, if anyone has a pointer.
  - dml2135 2y ago
    I'm pretty sure that the payout % for casinos is determined by regulations in most, if not all cases, and not by market dynamics.
    - s1artibartfast 2y ago
      I'd be interested to see numbers on that. Vegas has a 75% minimum payout on slot machines. Table games have their own return. Roulette, for example has a 98% return. Casinos definitely compete on table rake for poker
  - autoexec 2y ago
    > What's the evidence that it's better than a private entity? In this case, texas voters can demand the changes to prevent some company from buying all the numbers again. A private entity wouldn't be accountable to the public for anything. We have countless examples of private companies screwing over people both in secret or openly no matter how much the public wishes that they would stop.

Carrok 2y ago

[Offtopic] It drives me crazy that government sponsored lotteries are legal, but me playing a round of poker in the basement with a few friends is technically illegal. Nevermind sports betting apps being legal and poker apps not.

eMPee584 2y ago
At least here in Germany, half of sale proceedings of state-licensed lotteries go into social causes (our open source ecology germany e.v. managed to get several projects funded through this). Also, they are obliged to check each player against a black list of gambling addicts, which unlicensed online gambling venues probably don't give a toss about.
- vuln 2y ago
  Yeah the US States claim that the money goes to Education yet somehow ends up in the general slush fund in most cases.
  - IX-103 2y ago
    It's not that the money from the lottery ends up in a slush fund, it's that the government cuts funding for education by the amount that it gets from the lottery. The money from the cuts gives the government the same amount of "clean" money to do whatever they want with.
    - cool_dude85 2y ago
      Money is fungible and exactly this trick is common. Best to think of the education funding as a minimum below which funding cannot be cut. In Florida, where I live, it actually funds a specific scholarship program, so it really does have the effect of making the program difficult to slash.
- afh1 2y ago
  Your car makers and economy sure are doing great.

fsckboy 2y ago

the term they meant is texas lottery "riskless arbitrage". Buying a whole pizza, then standing in front of the pizza shop shelling the slices for a net profit is arbitrage. but it's risky because you might not be able to sell enough of them (before they get cold, say) to earn back your investment. when you talk about an arbitrage that is guaranteed profit, that is a riskless arbitrage.

sincerely 2y ago
Really? Doesn’t that describe every kind of store where you don’t create the product yourself as an arbitrage? You’re just buying items from a supplier and reselling to make a profit
- felizuno 2y ago
  For sure. Buying wholesale and selling retail is one of the most common/accessible windows of arbitrage you can find.
  - fsckboy 2y ago
    probably best to understand the way people use the term as a risk spectrum, from riskless arbitrage where there is no window for losing money, through say a real estate deal where you find a seller at a good price, and you find a buyer at the market price, and you insert yourself in the middle (a perfect houseflip) even though you don't have the capital to suffer the loss if things get screwed up, to an antique shop that buys on speculation and sells to reliable clients. A pawn shop is arbitrage too. generally people mean by arbitrage that you enter into a transaction having both a seller and a buyer in mind, or you have two liquid markets with different prices.
  - solatic 2y ago
    Buying wholesale and selling retail isn't arbitrage. Wholesale pricing is cheaper precisely because it is a bulk price. There is an overhead to selling individual units. A retail operator adds value by introducing individual unit liquidity, with the price premium of the individual unit offsetting the risks involved in paying the fixed costs of retail (rent etc.), not selling all the inventory, and having enough left over for a profit.

deleted 2y ago

[deleted]

brendanfinan 2y ago

This arbitrage is even more profitable if you only buy the lucky numbers.

_trampeltier 2y ago

Kind of the same did happen in Switzerland this January. https://www.tagesanzeiger.ch/loterie-romande-serial-players-koennten-ihre-wette-gewonnen-haben-244058131900 https://www.tagesanzeiger.ch/loterie-romande-serial-players-...

tzs 2y ago
I wonder if anyone is keeping a list of all the times this has happened? I know that its not something new, because 30 years ago when I was in law school one of the cases studied in my class on transnational taxation was that of an Australian group (if I'm remembering the right country...) that tried to buy every possible ticket in a US lottery. My recollection is that they only ended up getting something like 90% of the possible numbers but that was enough to get the top prizes and questions arose on how that should be taxed and whether the cost of the tickets was deductible.
- tjalfi 2y ago
  You're thinking of Stefan Mandel's International Lotto Fund[0]. They tried to buy every ticket in the Virginia state lottery in 1992. They won the money, but IIRC there were years of litigation. [0] http://investpost.org/mutual-funds/group-invests-5-million-to-hedge-bets-in-lottery/ http://investpost.org/mutual-funds/group-invests-5-million-t...
- thaumasiotes 2y ago
  > questions arose on how that should be taxed and whether the cost of the tickets was deductible What were the questions? What would the case be that cost of tickets shouldn't be deductible?
  - ascorbic 2y ago
    In many countries, gambling winnings are not taxed. I'm guessing the argument was that this wasn't really gambling.
  - tzs 2y ago
    As I said I was going from memory from a class 30 years ago. Looking at the case again, I see that the dispute was on whether tax should be withheld in the US. The tax treaty between the US and Australia said that the US would not tax the winnings. The winners had filed the appropriate form with the IRS to invoke the treaty and be exempt from tax. The state lottery commission automatically withholds federal and state taxes, and refused to make an exception for the Australians. The Australians sued and a district court issued an injunction to stop the state from withholding those taxes. The federal and state governments appealed. The appellate court reversed and removed the injunction. It turns out there is a law that prohibits courts from issuing injunctions to stop tax collection (and withholding counts as collection) so the district court overstepped its jurisdiction. What you are supposed to do if you think a tax is improperly applied is pay it and then seek a refund.

waldrews 2y ago

Ah, so if doing this once can net tens of millions, all we have to do is repeat the process a few million times, and the national debt is covered. That's where automation comes in.

paulsutter 2y ago

The key here is that only 1 million tickets per week are sold, which is the reason the company could estimate a probability that others buy the winning ticket forcing a split Jackpots higher than the probability of winning happen so the time, but thats not enough information to take the risk

WatchDog 2y ago

I used to work for the Australian parimutuel(aka tote or pool)[0] betting operator. All the proceeds for a race are placed in a pool, the operator deducts a percentage of pool as a takeout, and the rest is divided among the winners, or. is carried over into a jackpot. We had special bulk betting integrations for quantitative bettors, and even offered rebates on the takeout revenue, it's not secret, although it's not widely publicised.[1] There are stories of traders that have made lots of money betting in parimutuel markets[1] [0]: https://en.wikipedia.org/wiki/Parimutuel_betting https://en.wikipedia.org/wiki/Parimutuel_betting [1]: https://www.sportstradingnetwork.com/article/rebates-global-horse-race-betting/ https://www.sportstradingnetwork.com/article/rebates-global-... [2]: https://www.bloomberg.com/news/features/2018-05-03/the-gambler-who-cracked-the-horse-racing-code https://www.bloomberg.com/news/features/2018-05-03/the-gambl...

jamesfinlayson 2y ago
Which one? What became UBet or the one that is still TAB?
- WatchDog 2y ago
  Tabcorp
femto 2y ago
One of the standouts being the syndicate run by David Walsh (of MONA fame) and Zeljko Ranogajec. They made money because the rebates swung the odds in their favour [1]. My take is that: the syndicate wins because the odds were swung in their favour. The tote wins because even with the discounted percentage the increased pool size offset the rebate and made them more money. The rest of the mug punters lost since the syndicate was winning a portion of the pool they would have otherwise won. The rebates are a mechanism to reliably transfer additional money from mug punters to the tote via an enabling middleman (the syndicate). [1] https://www.perthturftalk.com.au/discussion/discussion/11724/an-incredible-story-about-rebates-etc https://www.perthturftalk.com.au/discussion/discussion/11724...
- 2y ago

charlieyu1 2y ago

I guess I’ll never understand why there are so many restrictions in buying lottery tickets, because in Hong Kong all you need do to buy all the numbers is a single transaction and paying enough money. And it is never a profitable strategy, big jackpots always attract a huge crowd and most of the time it is split at least 4 way

Panzer04 2y ago
This feels like a decent answer. A bit like allowing inssder trading, although that has many more problems XD

AGorilla 2y ago

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