A profitable lottery program can be managed by carefully managing costs. These costs include advertising, instant win tickets, and staffing costs. In addition, prize payouts must be limited and managed to keep the revenue in control. Prize payouts are the number one expense of a lottery, accounting for nearly half of the total revenue in some states. In contrast, administrative costs account for the remaining 10%. These expenses include staff salaries, legal fees, and ticket printing.

In the year 2005, James Harvey first started to look at the lottery. After visiting its offices in Braintree, Massachusetts, he requested a copy of the guidelines for playing. The lottery responded by sending Harvey a copy of its game guidelines. The information he received helped the MIT team improve its calculations.

Having a diverse range of game types can be a smart strategy for a profitable lottery. This helps attract more players and increase ticket sales. In addition, regulations specify the percentage of ticket sales that must be allocated to prizes. The New York Lotto, for example, allocates 40% of its ticket sales to prizes. Each prize level represents a different percentage of ticket sales. The jackpot, for example, represents 75% of ticket sales, while the prize fund for matching four numbers represents 6.25% of ticket sales.

While many states believe that lottery money is used for good, some experts are skeptical. Many argue that this method puts an unfair burden on the poorest people. Those who lose the most money in the lottery are typically black or Native American, and they tend to live in poor neighborhoods.