The story of the selbees, a couple who made ~8m for themselves and their community from gaming a lottery, is a great read [0]<p>Jon Wertheim: You saved all the losing tickets?<p>Marge Selbee: Saved them in big totes.<p>Jerry Selbee: Big plastic totes.<p>Jon Wertheim: There must have been millions.<p>Jerry Selbee: 18.<p>Jon Wertheim: $18 million worth of losing tickets. And you have those?<p>Jerry Selbee: Uh-huh just in case we had a physical federal audit.<p>Marge Selbee: We had the upstairs of the barn. I stored them in one end and in the other end. And then I thought, "Oh no, this floor is gonna fall through." So then we stored them down in the pole barn. And we had probably 60, 65 tubs of tickets.<p>[0] <a href="https://www.cbsnews.com/news/jerry-and-marge-selbee-how-a-retired-couple-won-millions-using-a-lottery-loophole-60-minutes-2019-06-09/" rel="nofollow">https://www.cbsnews.com/news/jerry-and-marge-selbee-how-a-re...</a>
Quant guy here. This boils down to information about the game, and maybe tax laws.<p>You have a load of scratch cards out there, most of them duds. If you come to a situation where a prize hasn't been claimed and there's few cards left to be sold, it's like counting Blackjack cards, the odds might change in your favour, or in favour of everyone who buys any ticket.<p>If that happens you need to do a bit of optimizing risk, assuming you have a limited amount of money to potentially lose. Kelly Criterion will have something to say here.<p>It really depends a lot on the details of the game. Are prizes rolled over if nobody found a winning card? Do cards expire? Is there a bulk buying discount? What is the nature of randomization? Does every region get its own guaranteed share of winners?<p>And crucially, is there information released about the progress of the game? This is maybe the toughest bit to figure out. With quant hedge funds you get this thing where you have to do a lot of asking questions about how the data was collected, to ensure your assumptions hold.<p>Tax I mentioned since it seems they formed a limited company. That's a whole game in itself, played by many many corporate entities in differing situations. You'd need to understand that as well. I know some traders whose entire jobs depend on understanding the difference between the tax codes of different countries.
What a poor excuse for news.<p>> "The four participants have not been accused of any crime. In fact, lottery officials in Indiana, Missouri and the District of Columbia told IndyStar that Montori and Davinroy, like all major prize winners, were vetted before receiving their winnings.<p>> "We have not conducted an investigation that fell outside our standard clearance processes for big winners." Wendy Baker, communications manager for the Missouri Lottery, said in an email to IndyStar last week.<p>And yet the IndyStar has publicised a heap of personal information about the winners online. Why?
> She did not respond to a phone message or attempts to reach her through family and social media.<p>uh yeah, these grifting creeps posing as journalists are exactly what people expect when they win lottery tickets and claim them non-anonymously.<p>these students are clearly fronts for limited partners that found a way to stay anonymous
This reminds me of the WinFall lottery [0], where if no one got a grand prize, the prize money was rolled over to the next week. As a result, if there were enough prizes rolled over to the next week the lottery could actually have a positive expected value, so groups of people started spending millions on tickets in these weeks. The lottery organizers didn't really even care much, since the people spending millions on tickets just increased their profitss.<p>[0] <a href="https://www.theatlantic.com/business/archive/2016/02/how-mit-students-gamed-the-lottery/470349/" rel="nofollow">https://www.theatlantic.com/business/archive/2016/02/how-mit...</a>
I read a similar story about someone in North Carolina a bit ago. He identified a scratch-off lottery game that was near its end, with an unclaimed top prize, and bought all the tickets left at gas stations in the less-populated parts of the state. He found the winning ticket.
>Even if the group developed a system for using public information to improve their odds, experts expressed skepticism that it could result in reliable profit.<p>My hunch is that winning tickets are not in fact equally distributed, and they have discovered something regarding this. Going by already claimed prizes gives some information, and I am sure there's a decent way to model the relationship between the set of claimed tickets to that of the unsold winning tickets (to account for the "safe-deposit box" cases mentioned in TFA, which strikes me as a bit of a red herring).
On the tax side, it is favorable.<p>Under default tax rules, each losing ticket is deductible against the winning ticket's tax.<p>Under a professional gambler election, each losing ticket is deductible as a Net Operating Loss, which allows deductions against everything and rolls over (and sometimes backwards) as a deduction into different years. Sadly, the tax reform law has severely limited this until 2026.
It hints at the method right here:<p>> Lottery officials said there is nothing wrong with players using data about the number of prizes outstanding during the lifetime of scratch-off games, which is regularly updated online<p>So not really news. It's just a group of people had the nerve and initiative to do it and hope that the math works they way they expect.
An (IMHO) more interesting story of somebody <i>actually</i> "hacking" the lottery (well, scratch cards): <a href="https://www.wired.com/2011/01/ff-lottery/" rel="nofollow">https://www.wired.com/2011/01/ff-lottery/</a>
My guess is they figured out who prints the lottery tickets, then gathered data on the ticket ID numbering system produced by that printer in the past(winner vs loser ticket ID's), then trained that data via deep learning to figure out probabilities of jackpot likelihood for each ticket ID # (or by range of numbers), then figured out the historic distribution patterns in relation to the ticket ID #'s, then pinpointed the specific places actually selling those ticket ID's, then drove to West Bumblefuck and bought all those tickets.
Rules to one of the mentioned lotteries. [0] It looks like prize counts are fixed in advance, so any information about redemption changes odds. Blacklight also shows that the lottery website is riddled with trackers, so it is possible they are inferring redemption from advertising data.<p>[0] <a href="https://hoosierlottery.com/getmedia/33f6f7bf-f0e6-4265-bcbe-d4153b498b3b/2090-7million-mega-cash-rules.pdf" rel="nofollow">https://hoosierlottery.com/getmedia/33f6f7bf-f0e6-4265-bcbe-...</a>
There’s a whole chapter in the popular mathematics book “How to Not Be Wrong” by Jordan Ellenberg that covers successful lottery strategies and the math behind them. As I recall from the book, the basic strategy was very simple and had a few groups of practitioners. Optimizing for increased incremental returns was far more sophisticated, though. There were also the operational challenges of buying and tracking so many tickets.
>The manager said they paid with cash or cashier's checks, and they weren't just buying at Break Time.<p>Couldn't they pay with credit cards and get credit card rewards to help their margin?
Probably just another scheme for rich daddies to launder money to their spoiled kids without paying tax.<p>Making money these days is all about having a rich daddy, rich mommy, sugar daddy or sugar mommy.<p>Gold diggers are the closest we have to 'self-made' these days.
Such a pity young capable people spend their most productive years doing something entirely unproductive.
And one more thing. Are they winning with scratch cards only? Then it could be that they are utilizing some equipment to look through the paint, with accomplices in a ticket factory or distribution chain.