WV scratch off lottery tickets and the retailer | mid 90's edition.
February 12, 2014 12:18 PM   Subscribe

As a teenager from 93-95 I worked at a somewhat shadily operated convenience store. When the owner would receive a shipment of scratch off tickets he would rip off 30 or 40 tickets and play them.

I vaguely remember him explaining the following:
    1. He had to pay for the tickets up front at some price other than face value(I think they came in rolls of 500).
    2. For winning tickets under $250.00 he had to pay the winner "out of the register".
    3. Profit for a role of tickets was guaranteed to be more than the cost of purchasing the tickets + any pay out.
    4. By playing some number of the tickets he potentially reduced the number of payouts he would have to make (i.e. hoping to come across a $100.00 winner) and could possibly win one of the bigger prizes for himself.
Is the process described in 1,2,& 3 accurate? At that time could you only redeem tickets winning tickets at the store where you bought them? While the odds of scratching off the first 40 tickets and coming out ahead seem pretty low would doing so have been illegal?
posted by jmsta to Grab Bag (16 answers total)
Unless I'm missing a complex fact, his expected value of selling a ticket should be greater than his expected value of playing. While he may pay less for them, he has the opportunity to sell them at a profit above and beyond.

If it's true that playing them has a higher return than selling, he should either play all or play none. I have trouble thinking of a function that would mean he should only play a small portion of the tickets...

Sounds like he was rationalizing a stupid gamble.
posted by jjmoney at 12:22 PM on February 12, 2014 [2 favorites]

Legality depends entirely on the laws of the particular state. Possibly other local laws might also apply. By playing them himself he's looking for the big prizes and avoiding paying out any smaller prizes. It might be against the terms of sale if nothing else.
posted by kindall at 12:23 PM on February 12, 2014

He may have had to pay the winner out of the register, but he'd only have to return the redeemed winning ticket to the lottery office to be reimbursed.

So...who knows what that was about?
posted by Ruthless Bunny at 12:36 PM on February 12, 2014 [1 favorite]

Lottery tickets are sold at a very low amount of commission (like 5% or something). The biggest win is when a patron of the store wins through a sale in the store, and the retailer gets a cut of that.
posted by xingcat at 12:36 PM on February 12, 2014

You said the place was shady, perhaps the owner was skimming from the till to pay for those 30-40 tickets and hoping for a winner?

In my state, I believe, all the scratch tickets for a given game series are printed at once and distributed to all of the c-stores, machines, grocery stores, etc. The state lottery website tracks winners and shows you how many jackpots have been redeemed for that series.

Perhaps the owner thought getting an early crack at a new game would give him a shot at a big jackpot.
posted by JoeZydeco at 12:45 PM on February 12, 2014

if the winning tickets are allocated per roll, instead of per game over all the distributors, the shady proprietor would gain knowledge about the rest of the roll.

some scratch-off lotteries can be hacked. texas allows multi-million dollar jackpots on scratch-off tickets, and a woman named joan ginther won FOUR of them on separate occasions. was she just lucky, or did her ph.d. in statistics from stanford have anything to do with it?
posted by bruce at 12:56 PM on February 12, 2014 [1 favorite]

I wouldn't think winners were allocated per roll. Lotteries want people to think there's an even chance on any ticket from any store. If a store could declare (implicity or explicitly) that the winners for that store have been exhausted, the store owner is left holding a bunch of duds that nobody wants to buy.

You could also buy every ticket from a single store and know you'll probably have a positive EV. Also not a good thing.
posted by JoeZydeco at 1:01 PM on February 12, 2014

At one point in Massachusetts the lottery guaranteed store keepers that every roll of scratch tickets would contain a certain number of winners. Enterprising store keepers responded by keeping track of how many winners a given roll had generated over time. If you got through most of a roll with relatively few winners showing up, you knew that the remaining tickets would be relatively rich and high value. These enterprising storekeepers then bought those tickets themselves, scratched them, and cashed them in.

It was a pretty big scandal when it came out that this was happening. I don't know exactly what steps were taken in response, but presumably they stopped guaranteeing a certain number of winning tickets per roll.

The scenario you're describing --- where store keepers grab the first tickets off the roll --- doesn't make much sense to me.
posted by alms at 1:14 PM on February 12, 2014 [2 favorites]

So... I have been known to occasionally buy a scratch-off ticket or two. A few months back, the clerk at 7-11 was trying to help me decide which tickets to buy by telling me which rolls started with low numbers. He said that the lottery puts more of the big winners at the beginning of the roll so that they can have a winner right away of, say, a $10,000 scratch-off prize to lure others to play that game. I'm guessing that if this happens everywhere, your owner was trying to win a big prize for himself.
posted by jabes at 1:18 PM on February 12, 2014

Also, I should add that I worked at a grocery store from 1995-2000 that sold scratch-off tickets. I believe we could pay out up to $600 "out of the register" (but again, this is not WV), and the store must've made some kind of profit on the tickets to convince them to become lotto retailers, so paying less than the $500 value for the roll of tickets would make sense (but I had no authority to do that, so this part is speculation). Tickets could be redeemed at any location that sold scratch-off tickets, so I'm not sure how that all evened out.
posted by jabes at 1:28 PM on February 12, 2014

Since you say he was shady, perhaps he was doing a combo: first by playing those 30-50 tickets; if any of them turned up a big winner, he'd be ahead. If not, he could hold onto those scratched-off tickets so when a customer came in to have their own tickets checked, if the customer's ticket was a high-value winner the shady store owner would swap it out with one of his own pre-scratched losing tickets. The store owner would then claim the customer's winning ticket as his own.
posted by easily confused at 1:51 PM on February 12, 2014

I remember a bartender at a dive in Seattle telling me about profiting off of pull tabs, but what she was doing sounds different (and less shady) than what you're describing. Still, it might be instructive.

She had a shelf full of boxes of pull tabs, which each cost $.25, $.50, $1, or $2 depending on the brand. Each box had a set amount of payouts listed on the front of the box (e.g., a certain number of $100 tabs, $50 tabs, and so forth), and when a customer won a payout, it would be crossed off. At the end of the night, she'd look at the boxes with fewer tabs remaining, and see whether the number & size of the remaining payouts was greater than the cost of the remaining tabs. If it was, she'd start opening tabs until she won some big payouts, then stop--taking the difference out of the cash register. According to her, she made at least a couple hundred bucks each week doing this.
posted by duffell at 6:35 PM on February 12, 2014

There was a legendary lotto scam (in Ontario? Ottawa?) which involved convenience store owners figuring out (from the codes printed down the sides of the tickets) which tickets were winners, and keeping those back for themselves. The same scandal involved owners telling holders of winning tickets that the ticket was a dud, tossing it in the trash under the counter, and then fishing it out when the mark had left the store.

There was a long and nasty investigation, started by Marketplace or The Fifth Estate or one of those programs. Could your guy have been involved in a similar scam?

Either that or he's laundering money. Often a way to make ends meet for a small struggling business.
posted by jrochest at 7:45 PM on February 12, 2014

Best answer: Figuring out combinations for printing lottery tickets is insanely hard: you can't have too many or too few winning combinations, they should be evenly distributed, they can't be predictable. Here's a story about a guy who broke the code used by some series: Cracking the Scratch Lottery Code

Your guy wasn't doing that. I suspect that he was either just a rationalising gambler, or his strategy was to draw tickets until he came out ahead by ($X), at which point he'd sell the rest of the tickets.

Here's a simplified scenario: Suppose a roll of 100 tickets costs him $400. He can sell each ticket for $5 and makes a one-dollar profit, or he can scratch tickets and hope to get the $300 jackpot. On average he needs to scratch 50 tickets to get the jackpot, so that earns him $300. And then he can sell the remaining fifty tickets for $250, so his total receipts are $550 on a cost of $400. He's basically made $50 more profit by scratching some of the tickets himself.

So why doesn't every retailer do this? I suspect it's because the margins on lottery tickets aren't really enough to make this work. Your employer was probably just stupid.
posted by Joe in Australia at 9:53 PM on February 12, 2014 [1 favorite]

I'm remembering a post from someone who used to occasionally buy a unopened pull tab box. He'd pay the barkeeper $50, and spend the evening pulling tabs from the entire roll/box.

It was a Mr. Cranky (or related) film review. Or related. But it explained the economics better than I can.
posted by BenevolentActor at 11:36 PM on February 12, 2014

If not, he could hold onto those scratched-off tickets so when a customer came in to have their own tickets checked, if the customer's ticket was a high-value winner the shady store owner would swap it out with one of his own pre-scratched losing tickets. The store owner would then claim the customer's winning ticket as his own.

I think this would be hard to do with scratch tickets, where the customer knows s/he's got a winner before handing it to the clerk.

With the drawn-number games (powerball, pick x, and the like), this is/was a pretty common tactic. Customers don't know whether they have a winner when they hand it to the clerk to scan. If the clerk swaps in a known dud and scans it, the customer sees a loser and walks away. The clerk can scan the actual ticket during a slow moment and keep any winnings.

As a result of a near-scandal, the lottery people (at least here) have been pushing signing your tickets even before you win anything as well as trying to get vendors to put the ticket scanners on the customer side of the counter.
posted by the christopher hundreds at 7:59 AM on February 13, 2014

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