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Gambling as a generalization has roots in the United States and other English colonies as far back as the s. Not every colony allowed gambling, however.
The Massachusetts Bay Colony, for example, did not allow cards, dice or gaming tables, even in private residences.
In most colonies however, gambling was seen as a harmless distraction as long as it was played in a gentlemanly manner. The acceptance of gambling in the colonies was fairly short-lived by English investors because it was seen as a sign of laziness and as a vice.
Lotteries were used not only as a form of entertainment but as a source of revenue to help fund the colonies. The financiers of Jamestown, Virginia, for instance, funded lotteries to raise money to support their colony.
These USA lotteries were quite sophisticated for the time period and even included instant winners. Not long after, each of the 13 original colonies established a lottery system to raise revenue.
In early American history, legislators commonly authorized lotteries to fund schools, roads, bridges, and other public works. Evangelical reformers in the s began denouncing lotteries on moral grounds and petitioned legislatures and constitutional conventions to ban them.
Recurring lottery scandals and a general backlash against legislative corruption following the Panic of also contributed to anti-lottery sentiments.
From to alone, 10 new state constitutions contained lottery bans. By , lotteries were prohibited in every state except Delaware and Louisiana.
Lottery policies within states can have conflicting goals. Given that instructions are passed down from state legislatures, lottery implementation is often expected to be carried out with reduced advertising and funding while still producing the same amount of revenue.
This issue led states to look for loopholes in the system. Massachusetts, for example, had its advertising budget dramatically cut, and therefore started using free-play coupons as money to pay for advertising.
This led to an IRS investigation into alleged non-reporting of income because the IRS considered the coupons to have monetary value.
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