How A Group of MIT Students Gamed the Massachusetts State Lottery: Part 2
Friday March 22, 2019 11:50 am
The Lottery Lab Staff
James Harvey and his friends established their business by 2010. It wasn’t long before other syndicates got into the action, too. One group was a team of biomedical researchers from Boston University. Another group was led by a retired shop owner named Gerald Selbee, a former math student who was a natural with numbers. He spotted a similar loophole in another state’s lotto in 2003. Selbee gathered a group of 32-people (friends, family, and acquaintances) but that lotto was discontinued in 2005 and they turned their attention to WinFall Cash.
During the summer of 2010, the Cash WinFall jackpot again approached the roll-down limit. When a jackpot worth $1.59 million went unclaimed, all the syndicates got into the action. They were sure that the roll-down was about to happen in the next 2 or 3 draws. Eash of the betting syndicates started preparing for the roll-down and by the end of the month, they were ready to bag thousands of dollars in winnings.
But their estimation was wrong and the roll-down rule kicked in before the next two or three drawings. Instead the jackpot leaped above $2 million with the next drawing. To the surprise of lottery officials, there was a huge increase in ticket sales, which was enough to drive the prize money past $3 million. With this flood of ticket sales, a premature roll-down was triggered. Lottery officials were just as shocked as anyone else. Considering the low value of the estimated jackpot, no one imagined that there would be such a spike in sales.
When the Cash WinFall lottery was first introduced, lottery officials had studied the possibility that someone would deliberately nudge the drawing into a roll-down by buying a large number of tickets. They were aware that the overall sales of the ticket depended on the estimated jackpot and the potential for roll-downs. But at the same time, the lottery officials didn’t want to get caught underestimating the prize money to discourage this behavior. To ease their minds, lottery statisticians calculated that a player using stores’ automated lottery machines would have to buy tickets with arbitrary numbers. Doing so, a player would be able to place 100 bets per minute. Officials estimated that if the jackpot was less than $1.7 million, the player would have to buy over $500,000 to push it over the limit of $2 million. This meant that it would take over 80 hours to buy sufficient tickets and the lottery didn’t think anyone would be able to tip the total over $2 million unless the jackpot was already over of $1.7 million.
But James and his group thought otherwise. James made a trip to lottery offices in the town of Braintree to get a copy of the guidelines for the games so that he could precisely outline the prize distribution. He finally got his hands on the lottery guidelines in 2008 and that information was a boost for the MIT group because until then they had been relying on their own calculations. While analyzing the past drawings, they realized that if the jackpot failed to top $1.6 million, the estimate for the next prize was almost always below the limit of $2 million.
After calculations and pushing the draw over the limit on August 16 had been the result of extensive planning. Also, for the appropriate jackpot size, one close to $1.6 million, they had to complete about 700,000 lottery ticket slips, manually. They took about a year to wrap it up by the time. But the good news was their effort paid off: they made around $700,000 that week.
Much to their disappointment, the profits did not continue much longer after that. Within a year, a story about the loophole in the Cash WinFall lottery was published by a local magazine. After that story, Gregory Sullivan, Massachusetts’ Inspector General, generated a detailed report on the matter in the summer of 2011. Inspector Sullivan also pointed out that the actions of the MIT group and others were entirely legal and he came to conclusion that “no one’s odds of having a winning ticket were affected by high-volume betting.”
By that point, a lot of people were making a lot of money from the Cash WinFall lottery and the game was eventually phased out. According to the MIT syndicate, even if the Cash WinFall continued after that, the game wouldn’t have remained profitable for the betting syndicates. More and more people were buying the tickets in roll-down weeks, and since the prizes were peri-mutuel they were split according to the lottery sales. This meant that prizes were split into even smaller chunks with the increase in the lottery ticket sales. When the risk of losing money increased with the shrinking potential of rewards, it was became crucial to obtain an edge over other teams. The MIT group gained an edge by understanding the game better as they knew the probabilities and payoffs and exactly how much advantage they held.
MIT syndicate wasn’t the first one to use the “brute force attack” to make money off of lotteries. There are earlier instances of people forming syndicates and applying this method. In a simple brute force attack, there aren’t many calculations required to it pull-off. The real obstacle is the logistical task of buying enough tickets and fill out the necessary play slips. But the MIT syndicate was one of a kind and they made a considerable profit from the Cash WinFall lottery for more than 5 years.