
How MIT Students Won $8M in the Massachusetts Lottery (2012) - onuryavuz
http://newsfeed.time.com/2012/08/07/how-mit-students-scammed-the-massachusetts-lottery-for-8-million/
======
downandout
This isn't the first time someone has been able to turn lottery odds in their
favor. A woman named Joan Ginther, who has a PhD in Statistics from Stanford,
won more than $15 million from a Texas lottery scratch card based game [1].
Though she has never spoken and exactly how she did it remains a mystery, her
odds of winning the number of times she did as a random buyer of scratch cards
were 1 in 18 _septillion_ and should occur approximately once every
_quadrillion_ years. Here's another case, where a geologist named Mohan
Srivastava cracked several different lottery scratch ticket games [2]. He
warned lottery officials, who did....nothing.

[1] [http://www.forbes.com/sites/kiriblakeley/2011/07/21/meet-
the...](http://www.forbes.com/sites/kiriblakeley/2011/07/21/meet-the-luckiest-
woman-in-the-world/)

[2]
[http://www.wired.com/2011/01/ff_lottery/](http://www.wired.com/2011/01/ff_lottery/)

~~~
rthomas6
After reading the wired article, what's to stop people who work at the ticket
printing companies from using their inside knowledge to exploit flaws?

~~~
hedwall
Most likely are they prohibited from buying lottery tickets from the company
that they work for.

Just like we where prohibited from gambling on the online gambling site i
worked for a couple of years ago.

~~~
braythwayt
I don't know what the story is today, but some years ago I worked in the same
office tower as the Ontario Gaming Corporation, and I had a nodding
acquaintance with some of their systems people.

They told me that employees were allowed to purchase tickets. The theory was,
if employees can't be trusted to buy tickets, there must be a flaw in the
system. And if there's a flaw in the system, then it will be exploited whether
you prohibit employees form directly purchasing tickets or not.

That obviously does not map directly to the employees of companies that print
scratch-and-win tickets, of course.

------
caminante
Old article. Please put (2012) in title.

prior discussions on HN:

[https://news.ycombinator.com/item?id=4340852](https://news.ycombinator.com/item?id=4340852)

[https://news.ycombinator.com/item?id=4341645](https://news.ycombinator.com/item?id=4341645)

[https://news.ycombinator.com/item?id=9678607](https://news.ycombinator.com/item?id=9678607)

~~~
slazaro
The third one links to this same page. I was confused for a second, thinking
that people copy-pasted their own comments from the last time or something.

~~~
caminante
Sorry. Would correct, but outside the edit window. Thanks!

Disclaimer: ...but I have a time machine ;-)

------
stygiansonic
The Irish National Lottery format used to be 36 choose 6, giving odds of a
jackpot win at 1 in 1,947,792. The cost of a single ticket was £0.50;
therefore you could buy up the entire "space" for £973,896.

Thus, when the jackpot rose above this value, it became economically viable to
buy up the entire "space" to guarantee a win; this would result in a profit so
as long as no one else bought a winning ticket. This is what a group of
individuals attempted to do in May 1992.[0]

They were limited by the physical requirement of filling out all such possible
combinations on the paper tickets, but they attempted to spread out the work
by pre-filling out combinations over several months and waiting for the
jackpot to rise to a large value before "deploying" the tickets.

0\.
[https://en.wikipedia.org/wiki/National_Lottery_(Ireland)#His...](https://en.wikipedia.org/wiki/National_Lottery_\(Ireland\)#History_of_Lotto)

~~~
derriz
Not quite. Covering the space only guarantees you a share of the jackpot - it
wasn't unknown for there to be more than 5 winners especially when the jackpot
was big as ticket sales skyrocketed What made the play profitable was the
introduction of novelty guaranteed amounts for matching 5 and 4 numbers -
regardless of the number of winners.

------
tokenadult
As this article from 2012 makes clear, the positive return on investment
resulted from unusual rules in one state lottery game that has now been
discontinued. The typical state lottery in most parts of the United States has
parimutuel pay-outs for winning tickets, meaning that if multiple purchasers
have winning numbers, they split the prize in a way that ensures that the
lottery doesn't pay out more money than was bet for that drawing. An example
from Britain was a national lottery that had something like seventy-six
different winners, who all bet on the same "lucky" number that happened to be
drawn in that drawing. They split the prize equally, so that each bettor's
individual winnings from a large prize were not particularly large. The number
may have been lucky in the sense that it matched the drawn number on that one
occasion, but the number wasn't INDIVIDUALLY lucky for each person who bet it.

Over and over and over, some people have winning tickets, but most people have
losing tickets. When a lottery is structured in the typical parimutuel way, as
most lotteries are, even if you buy all the tickets available for sale in the
next drawing, which takes a big investment, you can't be sure of winning a
full prize individually, because other bettors may have a collision with your
choice of a winning ticket number. tl;dr: A bug in one state lottery game was
discovered by MIT students, who invested in exploiting the bug until the game
was closed.

------
randlet
The url of this article and the titles of other uses the word "scammed" which
is unfortunate since they don't seem to have done anything of the sort.

~~~
dylanjermiah
Exactly. They did nothing illegal or immoral.

~~~
larrydag
What did they do?

BUMP: those downvoting. It's a serious question. The article doesn't explain
the student's methods. I really don't know what they did to game the system.
Is it well known?

~~~
Jtsummers
Ok, found the summary on Wikipedia [0], which matched my recollection from a
TV news magazine report from a few years ago when this came out.

When the jackpot reached a certain point, they'd increase the payout on the
lower tier prizes (match 5, 4, 3) from ($4000, $150, $5) to something more
significant.

Instead of needing to match all 6 numbers (range 1..46), you could get a good
return by only trying to match a smaller set. I guess they worked out a good
distribution of tickets to purchase that covered a large percentage of those
possibilities. They were purchasing 300k tickets to guarantee their 15-20%
ROI.

[0]
[http://en.wikipedia.org/wiki/Massachusetts_Lottery#Cash_Winf...](http://en.wikipedia.org/wiki/Massachusetts_Lottery#Cash_Winfall)

------
hownottowrite
_" This isn’t the first time that MIT has been involved in a gambling
controversy."_

If it isn't illegal, what's wrong with using brains to make money?

~~~
friendzis
Quite a lot of people see gambling as fun and/or random activity. Play some
blackjack with friends: everyone wins/loses and have a great time. Then along
comes someone who counts cards and... game ceases to be fun and players just
drop out.

There is nothing neither wrong nor immoral about such behaviour, just a huge
portion of others (those who just play for fun or are envious) sees such
activity as an act of jerkiness.

~~~
DennisP
A card counter in a casino doesn't reduce anyone else's fun. He just reduces
the profits of the casinos, which generally catch on long before they're
seriously hurt.

A while back I read about an early Microsoft employee who, once a year, goes
to Vegas and counts cards at high stakes until they throw him out. Generally
it takes about an hour, he makes several multiples of $10K, and donates it to
charity.

~~~
FlyingLawnmower
Any chance you have a link to the article about the charitable card counter?
That sounds fascinating.

~~~
DennisP
Sorry, it's been a while. I tried googling but no luck. Seems like it was
someone fairly well known.

~~~
fineman
Do you mean this:
[http://floodyberry.com/carmack/johnc_plan_1998.html#d1998020...](http://floodyberry.com/carmack/johnc_plan_1998.html#d19980209)

~~~
DennisP
I don't think so but that's pretty interesting.

------
pmorici
This article strongly implies there was something morally wrong about what the
students did but doesn't detail any actual misconduct on anyones part. Sounds
like the lottery officials just got their pants in a bunch because they like
to be the ones taking advantage of other people's naiveté and not the other
way around. Ironic that the article embeds a video of John Oliver ripping the
lottery for taking advantage of those who can least afford it.

~~~
__z
Sounds like lottery officials didn't "get their pants in a bunch" \- they were
actually complacent in the scheme.

>A recent report by the state’s inspector general reveals more details about
the scheme, including the fact that the _Massachusetts Lottery knew of the
students’ ploy and for years did nothing to stop it._ The inspector general’s
report claims that lottery officials actually bent rules to allow the group to
buy hundreds of thousands of the $2 tickets, because _doing so increased
revenues and made the lottery even more successful_. While the students’
actions are not illegal, state treasurer Steven Grossman, who oversees the
lottery, finally stopped the game this year.

~~~
balabaster
They're (wilfully) complacent and indirectly complicit. The more people buy
tickets, the more money they make. If someone finds a flaw that causes them to
buy a shit ton of tickets, the lottery commission makes a shit ton of cash - a
portion of which gets paid out in winnings. If someone exploiting the system
makes the lottery commission more money, why on earth would they fix it?
They're getting more rich by _not_ fixing it.

~~~
drblast
This doesn't make sense if the group buying the shit ton of tickets is making
money. Overall more money goes out than comes in. If someone puts $600k and
get $660k out, you can't make that up in volume.

If the lottery is still making money, it must come from other people who
aren't winning but still playing.

I'm not sure exactly how this lottery works, but I think in other games there
is no pile of cash sitting around. Instead the owner of the game insures it so
that an intermediary (insurance company) pays the winner. If that's the case
here the lottery commission will end up paying higher insurance premiums over
the long term, but might show a short term profit.

But if you take into account all of the sources of money, there's no way the
lottery commission could come out ahead on this.

~~~
LordKano
More tickets sold still means more income for the lottery.

That jackpot was going to be paid to someone, this group merely became that
someone.

Basically, they chose the best time to buy in so that they had a higher chance
of winning.

Moreover, when the jackpot grows high, more people play. It's almost certain
that their ticket buying inspired other people to buy more tickets as well.

------
baldfat
Lottery = Poor People Tax and should be removed from Government.

[http://www.businessinsider.com/lottery-is-a-tax-on-the-
poor-...](http://www.businessinsider.com/lottery-is-a-tax-on-the-poor-2012-4)

~~~
balabaster
Poor people or people that don't mind taking a risk for the chance of a
reward?

I know fairly wealthy people that still dabble on the lottery. They well aware
that the odds are stacked against them and many of them can quote the
statistical probability of their making (or not making) a profit on their
play, but they still gamble because a). it's amusing and b). because just
maybe they'll get lucky and will get a bazillion percent return on their
investment - plus, the amount they spend on the lottery is totally meaningless
to them.

Eventually you get to a point where the $5 (or whatever it costs) is so
trivial it makes zero difference in your life, so why not, right? It's not
really that much unlike Venture Capitalists. 95% of startups fail, yet they
still get VCs clamoring to invest in them every year because 5% of them may
pay off a windfall return. VCs are no slouches in finances; they're sharp,
quick witted, ruthless hustlers, yet still they play this lottery.

I would say that the lottery is less a tax on the poor than it is a tax on
those that are either ignorant to the math, aren't risk averse or are well off
enough that the cost of playing the lottery is much less meaningful to their
bottom line than the potential win would be.

After all, at least 1 person wins it most weeks, and every play has an equal
chance of being a winner - why not you? I'll spend my $5 on ice cream, because
I'd rather do something that will definitely make me feel good now than spend
$5 buying a piece of paper that will most probably be garbage in a few hours
and make me feel like I wasted the money - in the hope that just perhaps I'll
get rich and never have to worry about anything again, supposedly; though, I
guess it's no different than people supporting the Leafs, hoping every week
that their team will win, only to get crushed when they lose...again. Given
they're (allegedly, according to their fans) the richest team in the NHL
despite consistently sucking, it would appear that hope is a trillion dollar
industry, find a way to sell hope to everyone and you'll make your own
windfall.

~~~
learnstats2
>I know fairly wealthy people that still dabble on the lottery.

This might be obvious to everyone, but gambling expenditure is higher (as a
percentage) in low-income households, and still doesn't exceed 1% of
disposable income in any income group in the UK.

Ref: [http://www.ons.gov.uk/ons/rel/family-spending/family-
spendin...](http://www.ons.gov.uk/ons/rel/family-spending/family-
spending/2014-edition/rft-3-2-final-2013.xls)

People with more economic power can participate in forms of gambling with a
lower rake: we might call those investments.

~~~
balabaster
> This might be obvious to everyone, but gambling expenditure is higher (as a
> percentage) in low-income households

As is everything. Your household grocery bill is higher (as a percentage) in
low-income households. Everything is a higher percentage because the cost of
stuff doesn't go down when you have little money. Gambling, alcoholism and
drugs, medical bills, life don't cost less when you're broke, you just have to
pick and choose what you buy to make ends meet.

Hope and escape are the biggest sellers on the market. When everything around
you is geared towards selling "bigger is better", "newer is better", "richer
is better" and you have no means to participate in that "Xer is better"
society. Beauty companies sell us on "just use our makeup and it will cover
all your flaws and make you look beautiful", fitness companies sell us on
"just use our product and it will make you look beautiful", clothing companies
"just buy our clothes, they will make you look beautiful"... The media
constantly brainwash people to act that way.

Is it any wonder that people will spend out on anything that will let them
hope (even if just for an hour or two) that perhaps, no matter how small the
odds, they just might have a shot of "belonging" and joining those that have
made it... or purchase some means of escaping from that whole system - if just
for the hour or two it takes the drugs to wear off.

That's human nature. We live emotionally. We will die emotionally. No amount
of math or education is going to change that. As long as the media keeps
drumming its ever present beat that you need money to belong, you need stuff
to belong, you need to be someone to belong, people will keep spending money
on the hope of belonging... or spending money on a means of escaping from that
pressure.

~~~
learnstats2
> As is everything. [Everything] is higher (as a percentage) in low-income
> households.

No. Exceptions including (from the link above):

    
    
       Buns, cakes, biscuits etc.   Beef (fresh, chilled or frozen)    Bacon and ham   Fish and fish products  Milk     Butter Margarine, other vegetable fats and peanut butter   Fresh fruit  Dried fruit and nuts Preserved fruit and fruit based products  Fresh vegetables  Other preserved or processed vegetables    Sugar and sugar products Jams, marmalades Chocolate    Other food products     Cocoa and powdered chocolate Fruit and vegetable juices (inc. fruit squash)  Soft drinks (inc. fizzy and ready to drink fruit drinks)                              Beer, lager, ciders and perry (brought home)           Men's outer garments Men's under garments Women's outer garments Women's under garments  Boys' outer garments (5-15) Girls' outer garments (5-15) Infants' outer garments (under 5) Children's under garments (under 16)  Accessories Haberdashery and clothing hire                                                                  hire/repair of furniture/furnishings      Medicines, prescriptions, healthcare products etc.         Purchase of new cars and vans Purchase of second hand cars or vans Purchase of motorcycles and other vehicles   Spares and accessories Petrol, diesel and other motor oils Repairs and servicing Other motoring costs   Rail and tube fares Bus and coach fares  Other travel and transport                                      TV, video and computers        Computer software and games Equipment for sport, camping and open-air recreation Horticultural goods, garden equipment and plants Pets and pet food   Sports admissions, subscriptions, leisure class fees and equipment hire Cinema, theatre and museums etc. TV, video, satellite rental, cable subscriptions and TV licences  Development of film, deposit for film development, passport photos, holiday and school photos Gambling payments    Diaries, address books, cards etc. Newspapers    Package holidays - UK Package holidays - abroad             Restaurant and café meals Alcoholic drinks (away from home) Take away meals eaten at home Other take-away and snack food Contract catering (food) and canteens   Holiday in the UK Holiday abroad Room hire                           Hairdressing, beauty treatment Toilet paper   Hair products, cosmetics and related electrical appliances      Household insurances - structural, contents and appliances Medical insurance premiums Vehicle insurance including boat insurance Non-package holiday, other travel insurance   Moving house  Other services and professional fees              Money, cash gifts given to children Cash gifts and donations7 Club instalment payments (child) and interest on credit cards
    

Healthcare is explicitly included as something high-income households spend a
larger % on.

~~~
learnstats2
Please disregard the data here, in my haste I buggered it up :)

------
plorg
Here's the Boston Globe source article for the Time piece.

* [http://www.boston.com/news/local/massachusetts/articles/2012...](http://www.boston.com/news/local/massachusetts/articles/2012/07/31/inspector_general_says_lottery_allowed_gambling_syndicates_to_take_over_winfall_game/?page=full)

And a couple of investigative pieces the Globe had run previously:

* [http://www.boston.com/news/local/massachusetts/articles/2011...](http://www.boston.com/news/local/massachusetts/articles/2011/07/31/a_lottery_game_with_a_windfall_for_a_knowing_few/?page=full)

* [http://www.boston.com/news/local/massachusetts/articles/2011...](http://www.boston.com/news/local/massachusetts/articles/2011/10/16/a_game_of_chance_became_anything_but/?page=full)

A fun quote from the first piece they ran:

 _Mark Fettig of Tennessee, one of the top 10 winners during the May rolldown
week, urged the Globe not to write a story at all, saying “it would be
immoral’’ to attract more people to Cash WinFall and potentially dilute the
winnings of current players._

------
kdamken
It bothers me how the article implies that they were doing something wrong.
They figured out a trick to the system and used it to their benefit.

~~~
dheera
Exactly. Also, lotteries and gambling are all about who can come up with the
best strategy to game the system within a prescribed set of written rules.
Like everything else in life, it's a puzzle. What's the point of any game if
it's all chance and no strategy?

~~~
JoeAltmaier
I don't think that's generally assumed. Gambling is random; its exciting to
risk and win. There doesn't have to be any strategy at all. What 'strategy'
are all those grandmas using at the nickel slots?

~~~
dheera
That's why those grandmas lose money most of the time. One day a smart grandma
will figure out how to game those machines too; it's an open-ended puzzle left
to the world. They may build a better machine, and the world will again build
a better grandma over time.

The world and economy is a system with rules and ethics, and entrepreneurs
game that system within those rules and ethical bounds. Ping-pong wasn't first
played with the intention of having back-spins and side-spins, but spin balls
are perfectly within the written rules and are supposed to confuse and defeat
your opponent.

If you want to have an edge at rock-paper-scissors, it's all about
statistically analyzing and gaming your opponent, because humans are extremely
bad at being uniformly random. There are tournaments for this. It's just
humans being intelligent beings.

These students are gaming the lottery just the same.

Rules are rules; game and engineer the hell out of anything within those
bounds, I say. Make the world an interesting place.

------
chrisBob
I don't understand why the lottery commission would know and not stop this. If
they are guaranteed to win I think that is the same thing as the state have a
guaranteed loss.

~~~
leoedin
Not really. The guaranteed wins (presumably done by buying enough tickets to
cover a large proportion of the available number space) would be taken at the
expense of either any coincidental winners or at the expense of the rollover.

Lotteries are designed to take their cut from the tickets bought - some
proportion of the money from tickets then goes to the prize pot. More tickets
sold means more money for the lottery organisation, regardless of who buys
those tickets.

So the loser in this case was the "lucky" lottery player, who would have found
that, had they won, they had to share their prize with these guys.

~~~
balabaster
But just like every casino, the house always wins. The more tickets sold, the
more money the lottery makes. This is why despite knowing the flaws in the
system, it doesn't get fixed, they don't care... in fact, it's in their favor
to ignore it because those attempting to exploit the flaw only line the
lottery's pockets more. It's more profitable for them to ignore it and hope
that as little ruckus as possible draws attention to this corruption.

------
bradfa
This is from 2012, probably should include in the title.

------
rglovejoy
The card counting rings mentioned in the article have been going on for
decades. Edward Thorp, while a math professor at MIT, was the first to do a
rigorous analysis of card counting.

[http://en.wikipedia.org/wiki/Edward_O._Thorp](http://en.wikipedia.org/wiki/Edward_O._Thorp)

------
delinka
"While most students at [MIT] use their powers for good [...] others are
busily using their prodigious math skills to" win the lottery.

Interesting morals on display by the author.

Further: "While the students’ actions are not illegal, state treasurer Steven
Grossman, who oversees the lottery, finally stopped the game this year."

I expected the last part to say they'd filed charges against the students.
Since they didn't (because their activity wasn't illegal), the state treasurer
made the right decision to stop the game.

I'm not impressed by this author's writing skill.

------
S4M
Doesn't that mean that the lottery was losing money? How is that even
possible?

~~~
balabaster
I'm quite sure this scenario was modeled extensively and they were well aware
of it and had worked to ensure they were still profitable (or perhaps more so)
even if the flaw was exploited.

~~~
qbrass
The state takes their money off the top, and the rest goes towards the
jackpot. They make money as long as people play the game. They might have made
more money by hyping the higher jackpot to get more ticket sales, but it
obviously wasn't worth their time.

The people rushing to buy tickets because of that jackpot have the same
chances of winning as they would without MIT students buying tickets. They
have a reduced amount of time to try and win it, since MIT winning will lower
the jackpot, but they're probably better off for it by not throwing their
money at the game as much.

The people really losing out are the ones who buy tickets no matter what the
jackpot is, and that's only if they win after the jackpot has been lowered.
They may have won more money, but if that was their concern, they shouldn't
have been playing when the payout was so low.

------
SonicSoul
This story (and the math behind it) is discussed at length in "How Not to Be
Wrong: The Power of Mathematical Thinking" by Jordan Ellenberg. I highly
recommend it, the other stories in it are equally enlightening.

------
peter303
It takes a fair amount of man power to buy hundreds of thousands dollars of
lottery tickets. Especially if you have to fill out forms and submit them to a
cashier. I've heard of consortiums hiring people to do such.

------
topynate
So I suppose there's a sort of intergenerational underground community of
advantage players at MIT that these exploits come out of? Hard to imagine that
MIT just happens to be the source of unrelated rings.

~~~
Symmetry
In terms of these guys and the poker players no. But you'd be amazed how many
people from the MIT Assassins' Guild go into computer security.

------
reagency
Reading between the lines, there is a very strong hint that lottery officials
violated lottery rules to enable the exploitation, possibly for indirect
benefits. What the students is very similar to how card counting is supposed
to not work: they violated the maximum bet. And lottery officials let them,
against the rule of the lottery system.

It seems like no real harm done though: they guaranteed themselves winnings,
causing the jackpot to never grow, _before_ anyone else bought tickets against
the larger jackpot. So in a sense they just stomped the game before it
started, no other players got screwed out of their chance at any existing
jackpot.

~~~
mcv
As I understand it, there was no rule against the maximum number of tickets
(and therefore no maximum bet). But somebody buying up all the tickets did
increase the total revenue of the lottery, which is presumably something that
lottery officials are supposed to encourage (if there's any advertising for
it, at least), and may have been rewarded for.

------
akhilcacharya
Hah, what can't these people do.

------
helloz_0707
This is overrated.

Grant that you can make 15-20% ROI on your 600K investment, however, you could
have 95% chance to lose all of it and 5% chance to hit jackpot and win say 26
mil. Your expected value is high but no one would play 600K like that, unless
you are some rogue hedge fund manager.

You might well invest it in stock market, which has better Risk-reward ratio.

~~~
__z
You are totally missing the point. This one lottery game was set up in a way
that if you spend enough money at exactly the right time you are
mathematically guaranteed to make more money than you spent. You can't
guarantee success in the stock market and certainly not 20% ROI in a few days.

It isn't like they just threw $600k at the lottery blindly hoping for a
payout. This was a mathematical analysis.

~~~
conanbatt
There was still the massive risk of the strategy being replicated by someone
else and then both parties would lose money.

