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The Romans were much more enthusiastic gamblers. The Circus Maximus, which had a seating capacity of 380,000, was the site of some fifty chariot races every day. Yet even the Romans were leery of promoting gambling too much. The Latin for gambler, aleator, was considered a derisive term, and Roman law failed to consider any gambling wager as an enforceable contract (i.e., the winner could not sue a loser for his or her winnings in a Roman court of law).

For the ancient Jew, gambling was also an activity that was reserved to only the "seamier" parts of society. Known gamblers were not permitted to testify in Jewish courts, for it was thought that gamblers' testimony could be bought in order to pay off their gambling debts. In addition, if a Jew won from a fellow Jew, those winnings not only had to be returned, but they had to be paid back double; if a Jew had won from a Gentile, the winnings did not have to be returned, although the Jewish gambler would still receive some small punishment ( Fleming, 1978, p. 130).

For strict Muslims, gambling is absolutely forbidden in any form. The Koran states: "Satan seeks to sow dissension and hatred among you by means of wine and lots. . . therefore abstain from them." It is interesting to note that although casino gambling is legal in Muslim Egypt, Egyptian nationals are barred from entering these casinos, and all patrons must produce a valid foreign passport.

As a result of its unsavory reputation, restrictions on gambling have been adopted by practically every country in the world throughout history. The usual legal scenario involves outlawing casino gambling (unless the area is hoping to attract tourists, especially those who are considered "outsiders") as well as most other forms of gambling but to permit and sponsor lotteries and horse racing, which are considered the "harmless" forms of gambling.

The current controversy in the United States about lotteries and government's role in the gambling industry is merely a continuation of a debate that began in the 1600s with the founding of colonial America. This debate has always contained both economic and political elements that cannot be addressed separately. For the question that public policy officials face when they are dealing with the lottery question and gambling in general is: Does the revenue from the lottery or gambling justify the state's "tolerance" of this "necessary evil"? In other words` even proponents of lotteries or gambling generally concede that it is not a "good" activity but one that can be used to fund "good" causes.

This chapter will catalog the various episodes or distinct "waves" of lottery activity (as well as other gambling activities) in the history of the United States. The term wave is used to illustrate the rather cyclical and repetitive nature of intense lottery activity in U.S. history. For each wave, there will be a description of the good "causes" that lotteries supported as well as the circumstances that led to the eventual demise of intense lottery activity.

FIRST WAVE (1607-1820)
The first settlers at Jamestown, Virginia, endured almost every conceivable type of hardship as they settled the New World and the merchants financing this adventure faced financial disaster. To support their Jamestown venture, the settlers petitioned the English Parliament to conduct a lottery in England.

However, this was a time when England was awash in lotteries sponsored both by the government and by private concerns. In 1620, the House of Commons ordered the Virginia Company to stop selling tickets since the company's lotteries were competing with government lotteries that were not bringing in the amount of revenue that legislators had expected. With this major source of revenue for the colony drying up, the colony's sufferings increased all the more ( Sullivan, 1972, p. 14).

What this incident illustrates quite clearly is that playing lottery games came as naturally to English colonists as drinking tea. Although this initial lottery could be classified as a failure, it certainly did not dissuade fellow colonists from starting lotteries once they settled on American shores. In fact, lottery activity continued to increase steadily until the Revolutionary War, after which there was a virtual explosion in lottery activity for fifty years. It was not until the 1840s that almost all states outlawed lotteries.

The purpose of this section is to examine why lotteries were such a popular source of government funding during this period of time. Since it appears that the Revolutionary War was a watershed event in early American lottery activity, this section will be divided into two parts: pre-Revolutionary War and post-Revolutionary War.

Pre-Revolutionary War Lottery Activity
Lotteries were held throughout the early 1700s for all kinds of "good" causes that can be classified into two categories: educational institutions and public interest projects. The breakdown of good causes for lottery activity ought to give the reader a feel for the type of lottery activity that was tolerated during the early development of the United States.

Educational Institutions. One of the chief beneficiaries of lottery activity during the early 1700s was the developing American educational system. These educational lotteries had a twofold pur- pose: (1) to fund building projects for the struggling higher education institutions and (2) to establish basic education in frontier areas.

One of the first colleges to use lotteries to fund building projects was the College of Philadelphia (later known as the University of Pennsylvania). During the early 1700s, this institution conducted nine different lotteries for various building enterprises. But the future University of Pennsylvania had much company in using lotteries as the primary method of financing its building projects.

Both Yale and Harvard College (even in the earliest days, these two institutions aped each other!) used lotteries to build dormitories. In 1747, the Connecticut legislature gave Yale a license to raise £7,500, while Harvard waited until 1765 to win approval from the Massachusetts legislature to conduct a lottery worth £3,200. It is interesting to note that Harvard's fund-raising lottery was much less successful than Yale's lottery. The primary reason for the failure of Harvard's lottery was that it had to compete with lotteries that were being operated to support the troops that were fighting the French and Indian War. However, it certainly appears that Harvard has learned from its past mistakes, and its timing for fund-raising has greatly improved! But there were many other now-famous higher educational institutions that received their initial financial impetus from operating lotteries.

In 1746, King's College (later known as Columbia) sought a license from New York State to raise £2,250 for classroom buildings. This was the first of five lotteries that King's College would run until 1755. The New York legislature was also asked to authorize a lottery to benefit Union College. Rival Columbia objected heatedly to this competition; so to appease Columbia, the New York legislature gave Columbia a twenty-one-acre tract of land that included the land on which Rockefeller Center is built. Obviously, this source of revenue for Columbia was far greater than any lottery or series of lotteries could have ever raised for that institution.

In marked contrast to Columbia's hostilely opposing a rival's ability to raise funds through lottery activity, other colleges and states were remarkably charitable in permitting lotteries to benefit other colleges. For example, the College of New Jersey (later known as Princeton) petitioned the New Jersey legislature for permission to operate a lottery. However, the New Jersey state legislature refused to give college officials permission to have lottery drawings. But the Connecticut assembly, which was dominated by Yale graduates, did permit the College of New Jersey to conduct its lottery on its territory. One can only hope that Princeton graduates recall this largesse of Yale graduates! Massachusetts officials were also quite generous in allowing lottery tickets for the benefit of Dartmouth to be sold within its borders during this early colonial period. Perhaps the Harvard graduates in the Massachusetts legislature were aware of Harvard's failed attempt with a lottery and did not think that the little college to the north could successfully operate a lottery. However, Massachusetts residents were much more sympathetic to Dartmouth's needs than they were to Harvard's, and the Dartmouth lottery was a success.

Other levels of education also benefited from lottery activity. In Georgia, nearly twenty lotteries were operated to build and fund county "academies," one-room schoolhouses that later became the foundation of the public school system in Georgia. Other states such as Mississippi, Kentucky, and North Carolina and many others permitted lotteries so that local communities could raise sufficient funds to build schoolhouses. Hence, in many ways, lotteries made a significant contribution to the funding and development of the early American education system.

Public Interest Projects. This category includes a number of "causes" that benefited either individuals, institutions, or society as a whole. Lotteries were used to raise funds to finance new businesses such as hemp growing in New York and paper manufacturing in Massachusetts. Individuals were also routinely given permission to conduct lotteries if the proceeds of the lottery were used to pay the debts of a person who had gone bankrupt and was put in prison until he could pay his debts. While this might sound like an extreme example, it was not an unusual incident during this wave of lottery activity.

Thomas Jefferson was a staunch advocate of using lotteries to raise public funds. He called them a "salutary instrument wherein the tax is laid on the willing only" ( Fleming, 1978, p. 32). In 1826, the eighty-three-year-old former president had to apply to the Virginia legislature for permission to operate a lottery for himself. The United States was in the throes of a severe economic depression, with land and crop prices falling, and so most of the wealthy landowners in the South were experiencing financial difficulties.

Jefferson cosigned a promissory note of $20,000 for a friend even though he himself was already in debt $80,000. When his friend defaulted, they demanded that Jefferson pay the money. The only assets that Jefferson had were his home and two other parcels of Virginia real estate. However, the price that Jefferson would receive for his properties would not cover his debts. He decided that the best way to raise money was to initiate a lottery that would use his landholdings as the chief prize. The lottery was never carried out because Jefferson died on July 4, 1826, a few months before the lottery was to have taken place.

Lotteries were operated in New York for the Relief of Poor Widows and in Pennsylvania for the "useful arts." New Jersey permitted lotteries to help pay for a church steeple and to build boat landings. Massachusetts supported several lotteries in the 1760s to rebuild Faneuil Hall, which had been gutted by a fire. In many ways, colonial lotteries were today's equivalent of a state's permission for nonprofit institutions to issue nontaxable bonds. Lotteries were an essential form of financing public projects for colonial governments since their ability to levy taxes was always being attacked. Every colony and almost every citizen had experience with lotteries that muted any opposition to lottery activity.

Post-Revolutionary War Lottery Activity
With the coming of the Revolutionary War, the number of lotteries and the causes that lotteries supported greatly expanded. The two good causes (educational institutions and nonprofit activities) that had previously been financed by lottery activity continued to use lotteries as a means of finance. However, with the occurrence of the Revolutionary War, two other causes were added to the list that used lotteries as a means of support--namely, financing the Revolutionary War itself and building the country's transportation system.

Financing the Revolutionary War. While the British redcoats certainly provided an ample military threat to the newly declared independent colonies, perhaps the greatest problem that the Continental Congress faced was finding the money to finance the war. Taxation was out of the question. Since the colonists had been provoked into declaring their independence because of their deepseated hatred of taxation of any kind or form, public officials were well aware that imposing taxes on the population was certainly not in their best interest.

In order to pay for the war effort, Congress would do three things: (1) It would issue paper, which would eventually lead to rampant inflation; (2) it would borrow money from foreign powers such as France, Spain, and Holland, all of whom did contribute substantially to the Revolutionary War cause; and (3) it would establish a national lottery, which was the most politically painless way to raise funds. On November 1, 1776, the Board of the Treasury announced its plan to establish this national lottery, and with the institution of this lottery, lottery mania raged throughout all of the colonies.

The goal of the national lottery was to raise $1,005,000 for the Continental Army. While this goal was not met, it provided the basis for almost every colony to hold a lottery in support of its troops. In 1778, Massachusetts sought to raise $750,000 to entice enlistments into its army and held another lottery later to fund the $20,400 it needed to clothe its army. Many other states such as New York, Vermont, Rhode Island, North and South Carolina, and Virginia also held lotteries in support of their Revolutionary War forces. But this explosion in lottery activity did not end with the conclusion of the war.

Public Projects. The decades after the Revolutionary War were ones of great population growth. From 1790 to 1810, New York's population grew from 340, 120 to 959,049. In this same period, Kentucky's population grew from 73,677 to 406,511, while Pennsylvania's population went from 434,373 to 810,081. There was very similar growth in population for all of the other former colonies.

If these state governments had to provide just the same services that they were providing before the Revolutionary War, this in itself would have forced these governments to find additional sources of revenue. But besides providing additional services to accommodate this explosive population growth, the citizens of these states were also demanding that the state provide for the capital improvements necessary to sustain economic growth. Again, lotteries were viewed as the politically painless method of raising revenue to satisfy the public's desire for social improvements.

The biggest sums raised by lotteries during this post-Revolutionary War period went toward building up the internal infrastructure of the nation. As the population increased and moved westward, roads and bridges had to be constructed and canals built.

Roads such as Mountain Road that connected the Ohio River with Virginia and canals such as the Erie Canal were needed to spur commerce. Massachusetts granted lottery authorizations for projects such as building bridges that would connect Ipswich and Gloucester (north of Boston) and another that would cross the Connecticut River so that farm produce and textile products could reach Connecticut from the Springfield area. In Pennsylvania, lotteries raised $400,000 for various capital projects. This money was used to construct canals between the Schuykill and Delaware Rivers and between the Schuykill and Susquehanna Rivers. Lotteries were the source of funding for most of the great canals that were built during the early 1800s, the great canal-building era.

There were also a variety of other capital projects that used lotteries as a means of financing these worthy causes. Frankfort, Kentucky, was authorized to conduct a lottery to raise $50,000 for a water supply. Both St. Louis and Detroit were permitted to have lotteries by their respective states in order to finance fire-fighting equipment. Once again, educational institutions needed to expand and develop, and they again turned to lotteries to support this cause. When it was finally agreed that the new nation needed a capital, Congress launched a lottery in order to pay for it. This national lottery was a great success but was greatly opposed by the states who were also conducting lotteries at the same time. It certainly was a precursor of competition between federal officials and state officials over various ways of raising revenue. Once again, lotteries proved to be the tried and proven method to raise funds for these projects, and about one hundred lotteries were conducted in the tenyear period at the end of the Revolutionary War and hundreds of other lotteries were operated during the period from 1810 to 1840.

However, this "golden age" of the lottery lasted only until the 1840s. There were two developments that led to the decline in lottery activity. First, with the passage of the U.S. Constitution, there was finally a strong central government that could and would collect tax revenue. Even those citizens who opposed taxation conceded that if government was to provide needed services, then government must possess a more consistent source of revenue than merely operating lotteries. It is somewhat ironic that the first tax revenues imposed were those on the consumption of whiskey, which sparked the Whiskey Rebellion. But this rebellion was put down and provided legislators the opportunity to impose taxes and collect on them. It also established the American custom of taxing "sin" and enshrining the adage "The wages of sin is a tax." Another factor that made government less dependent on lotteries was the establishment of a reliable financial system. Now state government had the ability to issue bonds in order to pay for needed capital improvements.

But the primary reason why lotteries declined was the method employed to sell lottery tickets. A broker would, first, contact the state or an institution that the state had licensed to conduct a lottery. This broker would point out to those in charge of the lottery that because of his experience and the size of his operation, he could sell a far greater number of tickets than if they attempted to conduct the lottery themselves. The broker was usually paid a percentage of the total amount realized through lottery ticket sales. But this method of payment tempted lottery brokers to sell all sorts of bogus tickets and to engage in all types of illegal schemes. Scandal after scandal broke about lottery fraud, which eventually infuriated the public and forced legislators to abolish lotteries in their states. The following examples of the corruption that led to the downfall of lottery activity occurred throughout the United States. In 1818, after local newspapers had informed their readers that the Medical Science Lottery was fixed, the New York legislature launched an investigation. The legislature's investigation revealed that the operators regularly informed prominent people, mostly politicians, what the winning numbers would be. After this lottery scandal, public opinion forced New York legislators to enact legislation that banned the sale of lottery tickets in New York.

The scandal surrounding the lottery for Washington, D.C., provoked an outcome that frightened lawmakers all over the country. In 1823, Congress authorized the Grand National Lottery in order to pay for improvements to the city. Tickets were sold, and the drawing took place, but before anyone could collect their winnings, the agent who organized the lottery for D.C. fled town. With him went several hundred thousand dollars that had been awarded as prizes.

While the majority of winners of this lottery accepted their fate with resignation, the winner of the $100,000 grand prize decided to pursue his dream. He sued the District of Columbia, claiming that the city was responsible for the conduct of its agent. The case went all the way to the Supreme Court, where the Court ruled that indeed the city was responsible for the agent's action and therefore obligated to pay him.

This Supreme Court decision was a sobering reminder to local officials that authorizing lotteries could be potentially dangerous and that the proceeds from lotteries were not necessarily painless. With the coming of this potential legal liability along with the public's outcry over various other lottery scandals, the movement to ban lotteries had begun.

During the period from 1840 to 1860, all but two states ( Missouri and Kentucky) prohibited lottery activity. In fact, two states ( Texas and California) that were admitted to the Union during this period actually had provisions in their constitutions banning lotteries. So in less than a half century, lottery activity rose to new heights and fell just as rapidly. However, while it appeared that lotteries had disappeared, it would take less than thirty years for lotteries to once again explode on the national scene.