The lottery is a classic case of policymaking done piecemeal and incrementally. The state legislates a monopoly for itself; establishes a public agency to run the lottery and a set of games; begins operations with modest numbers and simplicity; and, due to pressures for additional revenue, progressively expands the number and variety of games offered. The end result is that lottery officials become accustomed to a steady stream of new revenues and develop extensive specific constituencies, including convenience store operators (who are the primary vendors of the tickets); lottery suppliers who give heavy contributions to state political campaigns; teachers (if the revenue is earmarked for education); state legislators, etc.

In addition to a basic game, most lotteries have a prize that is awarded by random drawing of the winning numbers. These prizes can include cash, goods, services, or even real estate. Other prizes are awarded for a particular task or behavior, such as the NBA draft lottery, in which the 14 teams that did not make the playoffs compete to be given the first pick of college players by lottery.

The first known European lotteries in the modern sense of the word were organized in 15th-century Burgundy and Flanders to raise funds for poor relief and city defenses. Francis I of France authorized the establishment of public lotteries in several cities. Earlier, the Romans organized lottery-like events to award fancy dinnerware to guests at their Saturnalian feasts. These early lotteries did not involve money prizes but rather the distribution of numbered tickets.