Why there have been so many $1 billion lottery jackpots since 2016

July 27, 2023 ndowd

Just a week after one person won the $1.08 billion Powerball jackpot, Mega Millions is also approaching the seven-figure mark, making it possibly the eighth time since 2016 that one of the two lottos has offered prizes of at least $1 billion (there were none of this size before then).

As of now, the jackpot sits at an estimated $910 million, but could rise further before Friday’s drawing. It could be the fourth Mega Millions to surpass $1 billion, including the second this year alone.

It might seem like a crazy coincidence, but the larger jackpots are actually by design. The Multi-State Lottery Association, which operates Powerball, changed the rules in 2015. Officials changed the number of balls to draw from, making it easier to win smaller prizes, but harder to win a bigger pot. That means the top prize keeps rolling over drawing after drawing, growing bigger and bigger in the process. Powerball players have a one-in-292-million chance of winning the jackpot.

A couple years later, Mega Millions rules were similarly changed to make jackpots pay out less frequently. The odds of winning the top prize changed from one in 258,890,850 to one in 302,575,350. Officials worried there was waning interest in the game and the larger pots would entice more people to buy; critics say the rule changes are unfair to players.

“These changes achieved their intended effect, significantly impacting the odds of hitting the jackpot and giving prizes a chance to more frequently grow,” says Akshay Khanna, CEO of Jackpot.com, which sells state lottery tickets.

And the Fed raising interest rates, as it did again Wednesday, is also partly responsible. The headline figure—in this case, $910 million—is actually the estimated value of the annuity, which accrues interest from a portfolio of U.S. Treasury bonds it is invested in over 30 years. So higher interest rates mean higher payouts (four of the seven billion-dollar jackpots have been drawn since 2022, when the Fed started hiking rates) over time.

“You might not realize that an economic reality like interest rates impact even the Powerball jackpot, but they do,” reads Powerball’s websites.

The current cash value for Friday’s estimated $910 million jackpot is actually $464.2 million, pre-tax. The annuity would pay out an average of $30.3 million per year over 30 years pre-tax. Most winners opt for the lump sum.

Here’s a run-down of billion-dollar lotto prizes.

1. $2.04 billion: Powerball

The largest in lottery prize history was a Powerball jackpot from November of 2022, although lottery officials did not reveal the winner’s name until February of this year. It was sold to a single ticket holder in California. It is also the jackpot’s whose lump sum cash value is the closest to $1 billion, at $997.6 million.

2. $1.586 billion: Powerball

There were three winners for the second-largest jackpot in history, all of whom bought their own tickets from different vendors in California, Florida, and Tennessee. The numbers were drawn in January 2016.

3. $1.537 billion: Mega Millions

A single winner in South Carolina claimed the largest Mega Millions prize to date, which was drawn in October 2018.

4. $1.348 billion: Mega Millions

One ticket holder in Maine won the jackpot in January of this year.

5. $1.337 billion: Mega Millions

A single winner in Illinois won this jackpot, which was drawn in July 2022.

6. $1.08 billion: Powerball

The most recent billion-dollar jackpot was won by a single player in California last week, who has yet to come forward to claim it, according to CBS News (perhaps they are getting their affairs in order first). The cash value of the prize was worth $558.1 million, pre-tax.