History of Prohibition: When Lotteries Were Banned in America

In the 17th and 18th centuries, lotteries were viewed as a “painless tax” rather than a moral vice. Early settlers utilized them to fund essential public works where traditional taxation was unfeasible.

• Infrastructure and Education: Proceeds from early lotteries funded the ships sent to Jamestown in 1612 and supported the construction of roads, bridges, and churches [2].

• The Founding Fathers: Prominent figures like Benjamin Franklin, George Washington, and John Hancock sponsored lotteries. Washington specifically ran a lottery to fund the Mountain Road in Virginia [3].

• Universities: Some of America’s most prestigious Ivy League institutions, including Harvard, Yale, and Princeton, were established or expanded using lottery funds [2].

As we explored in our look at The Evolution of Lotteries Over the Centuries, this reliance on gambling for public good eventually gave way to massive corruption, leading to the prohibition era.

By the mid-19th century, the landscape had shifted. Private contractors began managing state lotteries for profit, leading to decreased transparency and increased fraud.

The Louisiana Lottery Scandal

The most significant catalyst for prohibition was the Louisiana State Lottery Company, often referred to as “The Golden Octopus.” Founded in 1868 during the Reconstruction era, this private corporation held a monopoly on drawings in Louisiana but sold its tickets nationwide via the U.S. Mail [3].

The company became known for extreme corruption, including the bribery of state and federal officials to maintain its charter. By the 1890s, the public outcry against the “Louisiana Octopus” reached a fever pitch, prompting federal intervention.

Moral Reform and Anthony Comstock

The Victorian era brought a wave of religious and moral reform. Anthony Comstock, a postal inspector and social reformer, spearheaded a campaign against what he deemed “vice.” He lobbied successfully for the Anti-Lottery Act of 1890, which barred lottery materials from the U.S. Postal Service [1].

By 1895, Congress passed further legislation forbidding the shipment of lottery tickets across state lines via any method of interstate commerce [3]. Consequently, by 1894, every state except Louisiana had outlawed lotteries; Louisiana followed shortly after, ending legal drawings in the U.S. for seven decades.

While legal lotteries were gone, the demand for gambling did not disappear. Instead, it moved underground or overseas.

1. Numbers Racket: In urban centers, “Policy” or “The Numbers” games became a staple of the underground economy, often controlled by organized crime [4].
2. Foreign Lotteries: Americans frequently smuggled tickets from foreign lotteries, such as the Irish Sweepstakes, which became a popular (though illegal) pastime in the early 20th century [1].
3. Strict Statehood Requirements: The anti-gambling sentiment was so strong that states like Arizona and New Mexico were required to outlaw casinos as a condition for gaining statehood in 1912 [1].

The prohibition ended not because the moral objection vanished, but because states became desperate for revenue without raising taxes. New Hampshire became the first state to break the ban in 1964 with the “New Hampshire Sweepstakes” [3].

Since then, the lottery has evolved into a highly regulated global industry. For those interested in modern opportunities, you can read our guide on How to Safely Play International Lotteries Online.

• Historical Necessity: Early American lotteries were critical financial tools for building infrastructure and Ivy League universities.

• The Cause of Ban: Corruption and bribery, specifically involving the Louisiana State Lottery, led to federal intervention.

• Federal Action: The Anti-Lottery Act of 1890 used the U.S. Post Office to effectively dismantle the lottery industry across state lines.

• Prohibition Era: For 70 years, no legal lottery existed in the U.S., leading to the rise of “Numbers” games and the Irish Sweepstakes.

• 1964 Turning Point: New Hampshire’s 1964 sweepstakes marked the beginning of the modern era of state-sponsored gambling.

Action Plan for the Informed Player

1. Research State Usage: Understand that lottery proceeds in your state are likely still used for the same goals as the 1700s—education and infrastructure.
2. Play Regulated Games: To avoid the fraud that led to the 19th-century bans, only engage with state-licensed or verified international platforms.
3. Recognize the History: Know that current lottery regulations are a direct response to the “Louisiana Octopus” scandal and are designed to protect players from past abuses.

While the “promise of getting something for nothing” was once viewed as a societal threat [1], today’s lotteries are highly regulated revenue streams that balance public funding with personal entertainment.