We think of lotteries as modern, but they were a popular way of raising money in early North Carolina—in colonial times and especially during the Early Republic after the American Revolution. Between 1759 and 1834, North Carolina’s legislature authorized 101 lotteries, according to a tally by Alan D. Watson.
In a lottery, people buy low-priced tickets in the hope that they will win a prize greatly in excess of what they have paid.
Here’s how they work. Suppose a town wants to support a good cause but doesn’t have enough funds. It can offer 500 tickets for $2 each. Everyone who buys a ticket has a one-in-500 chance of winning a prize. Suppose the prize is $300. If all the tickets are sold, the lottery managers will obtain $1,000 (500 times $2), minus the $300 prize they must give to the winner. Thus, they will have raised $700.
So, a lottery is a way of raising money. It has both positive and negative elements. It is voluntary (unlike taxes), and the price of each ticket is usually small. But poor people may be so attracted to the prize that they will pay money they need to use elsewhere. (After all, the chances of winning a lottery are usually low.)
Raising Money for Good Causes
In North Carolina’s early years, lotteries were used to raise money for causes such building or supporting schools. Most were for private educational academies, but the University of North Carolina had lotteries in 1801 and 1802, from which it obtained in total $5080.81.[2] Alan Watson summarizes the groups that benefited from North Carolina lotteries as: “educational institutions, internal improvements, churches, fraternal societies, private, individual projects, and local and county government enterprises.”[3] A government enterprise could use a lottery to clean up a river, and a private company could use a lottery to expand a manufacturing plant.
As Watson explains, North Carolina’s lotteries tended to be “small compared to those undertaken in Virginia, Maryland, and many northern states. The average sum of money that North Carolina lotteries intended to raise was $5,555.” When four $50,000 lotteries are taken out of the 101 total (between 1759 and 1834), the average amount hoped for was $3,335.[4] As in the example described above, some lotteries sought to raise only $500 or $1,000.
Some Never Got Off the Ground
Watson’s list of 101 planned lotteries exceeds the actual number that were held, as he points out. Although North Carolina’s General Assembly had to authorize lotteries for them to be legal, many never got off the ground. That is because many potential ticket-buyers didn’t have money to spare and there was often a shortage of cash in the colonies.
Then, around 1812, lotteries went out of fashion. Taxation may have become more stable, but the change was also due to religious and moralistic objections to lotteries. They began to be viewed as “gaming” or “gambling,” as indeed they were. What had changed was that gaming, even by states for good causes, was now considered immoral. North Carolina banned lotteries in 1835.
That ban did not last forever. In the 1960s, other states began to re-introduce lotteries, starting with New Hampshire in 1964.[5] It was not until 2005 that North Carolina started its lottery again, with the proceeds directed to supporting schools. In fiscal year 2022, the state lottery sold $3.88 billion in tickets and paid out $2.54 billion in prizes.[6]