Monday, August 2, 2010

Huge Disparity in California's Mega Million Payouts

Betting on the Favorite, an 1870 engravingImage via Wikipedia
In last Friday's Mega Millions drawing, nobody won the jackpot, but 4 separate tickets matched all five of the white balls and claimed the 2nd place price. Two tickets were sold in Illinois, 1 in New York, and 1 in California.

Typically, the payout for this prize level is $250,000. This is true in all states except California, which determines the prize levels on a pari-mutuel basis. So, while 3 of the 4 winners will each receive $250,000, the one winner in California will only get $182,348.

That's a difference of $67,652 or 27% less!

In theory, one can argue that pari-mutuel payouts are most beneficial to players. But, looking at the 9 different drawing results for the month of July 2010, seven paid out substantially less than $250K, and only two paid out more than $300K.  The highest allocation was $342.9K, but there were no winners that time, so nothing was paid out.

While California's calculation of payout may be correct, I believe that players in California who win big prizes actually lose a lot of money to the State. Remember, the State sets the prize breakdown and doesn't share the leftover money with the players. So one must ask the question:

Where Does the Mega Millions Money Really Go?

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