How a convience-store-owner hacked the lottery odds and won $27 million

Here's a fascinating story about a convenience-store owner in Michigan, Jerry Selbee, who cracked a Michigan state lottery — and then a similar one in Massachusetts. He didn't do anything illegal; he just realized the lotteries were constructed in such a fashion that under certain conditions, if you bet big and could spend more than $100,000 on tickets, you were statistically guaranteed to come out ahead.

Selbee figured this out and grossed $27 million over nine years of play. It took a ton of work; he and his wife would spend hours and hours of eye-glazing effort not just buying tickets but sorting through for the winners. For much of their nine-year run, it appears the various state lottery commissions not only knew what was going on — they could see the massive group buys — but were okay with it; nobody was breaking rules, they figured, just exploiting the odds.

A group of students at MIT had the same epiphany Selbee had, formed their own group, and not only figured out how to make money but how to do such massive ticket buy that it could trigger automated lottery rule-changes that worked in their favor.

The whole thing came crashing down in 2011 when Andrea Estes, a razosharp reporter at the Boston Globe, investigated what was going on and the states shut down those lotteries.

This story broke back in 2019, so I'm coming late to it, but the Huffington Post ran a fantastic long story about it — really worth reading in full.

Here's an excerpt noting precisely how Selbee's hack worked:

This particular game was called Winfall. A ticket cost $1. You picked six numbers, 1 through 49, and the Michigan Lottery drew six numbers. Six correct guesses won you the jackpot, guaranteed to be at least $2 million and often higher. If you guessed five, four, three, or two of the six numbers, you won lesser amounts. What intrigued Jerry was the game's unusual gimmick, known as a roll-down: If nobody won the jackpot for a while, and the jackpot climbed above $5 million, there was a roll-down, which meant that on the next drawing, as long as there was no six-number winner, the jackpot cash flowed to the lesser tiers of winners, like water spilling over from the highest basin in a fountain to lower basins. There were lottery games in other states that offered roll-downs, but none structured quite like Winfall's. A roll-down happened every six weeks or so, and it was a big deal, announced by the Michigan Lottery ahead of time as a marketing hook, a way to bring bettors into the game, and sure enough, players increased their bets on roll-down weeks, hoping to snag a piece of the jackpot.

The brochure listed the odds of various correct guesses. Jerry saw that you had a 1-in-54 chance to pick three out of the six numbers in a drawing, winning $5, and a 1-in-1,500 chance to pick four numbers, winning $100. What he now realized, doing some mental arithmetic, was that a player who waited until the roll-down stood to win more than he lost, on average, as long as no player that week picked all six numbers. With the jackpot spilling over, each winning three-number combination would put $50 in the player's pocket instead of $5, and the four-number winners would pay out $1,000 in prize money instead of $100, and all of a sudden, the odds were in your favor. If no one won the jackpot, Jerry realized, a $1 lottery ticket was worth more than $1 on a roll-down week—statistically speaking.

"I just multiplied it out," Jerry recalled, "and then I said, 'Hell, you got a positive return here.'"

(That CC-2.0-licensed photo of a lottery ticket — just a generic lottery ballot, not a Winfall one — by Santeri Viinamäki, courtesy Wikimedia)