The Ultimate Guide to How Lottery Jackpots are Calculated

Players at theLotter can buy official lottery tickets for over 50 international lotteries, and counting! Each lottery on theLotter is different, some with bigger jackpots, some with better winning odds like Japan's Mini Loto, and some are daily draws like Italy MillionDAY. There is a lottery for every player and playing style on theLotter! While all of the lotteries on the site are different, they all have one thing in common: players want to win the jackpot! Everyone wants to win, but how are lottery jackpots calculated? Let’s take a look at the different ways jackpots and prizes are set, calculated, and grow. By understanding how these games are designed, we can become better lottery players and, hopefully, winners!

Guaranteed Lottery Prizes

Most of the biggest and most popular lotteries on theLotter have some form of prize guarantee. Take EuroMillions, for example. The EuroMillions jackpot starts at €17 million, which means that there is a €17 million guaranteed jackpot. The pan-European EuroJackpot lotto is similar, with a guaranteed minimum jackpot of €10 million.

When you play Powerball or buy tickets for Mega Millions, there is a guaranteed second prize of US$1 million. The rest of the prize categories are guaranteed, as well. In both Powerball and Mega Millions, it is possible to add a multiplier option that will vary depending on the draw and ticket sales, although it is still fair to say that the secondary prizes are guaranteed because the minimum winning amounts are fixed. Although you may wonder if there are any tips for winning the Powerball jackpot, winning a second prize is also quite satisfactory!

It is also important to note that regardless of how many people win a guaranteed prize, they will all receive that prize amount. For example, if five people win the Powerball US$1 million 2nd prize, they will each receive US$1 million.

Pari-Mutuel Jackpots

If you have never read the fine print of a lottery, there is a good chance that you have no idea what these words mean. That’s ok, we’re here to tell you. Pari Mutuel is French for ‘mutual betting.’ The concept originated in France in the 1870’s for betting on horseracing and other sports, but is applicable to the lottery, as well.

In a Pari-Mutuel lottery system, revenue from ticket sales is divided amongst the prize categories; there are no fixed prize amounts. EuroMillions is an example of a Pari-Mutuel lottery. Each prize category, from the jackpot down, receives a percentage of the overall ticket sales. There are no fixed prize amounts except for the guaranteed starting jackpot.
US Powerball and Mega Millions also fit into this category. Each offer jackpot prizes that are calculated on a Pari-Mutuel basis, meaning they're determined by ticket sales and interest rates. Both start at an estimated US$20 million.

Another important feature of Pari-Mutuel lotteries is that winners in a prize category split the prize equally. If five people win a 3rd prize worth US$50,000, each person wins US$10,000. This is the complete opposite of a guaranteed prize because the amount a winner will take home depends on how many other winners there are, as there is no guarantee.

Pari-Mutuel vs. Guaranteed Prizes

Which system is better, Pari-Mutuel or guaranteed? The truth is that there is no right answer. A guaranteed prize is just that, you know exactly what you will win regardless of how many other people draw the same numbers and therefore win the same prize.

Pari-Mutuel systems have a lot more fluctuation in both prize amounts and winner amounts, depending on ticket sales and the amount of winners.

Sometimes Pari-Mutuel comes out ahead of guaranteed, sometimes it doesn’t. However, because of the variability inherent to the Pari-Mutuel system, it keeps lottery players on their toes. It is definitely worthwhile to pay attention to prize amounts.

Progressive Jackpots

A progressive jackpot is one in which if the jackpot is not won, it will carry over and grow for the next drawing. Most lotteries feature a progressive jackpot and sometimes secondary prizes, as well.

The US$1.586 billion US Powerball jackpot is a perfect example of a progressive jackpot in action. Rollover after rollover, the jackpot grew until three lucky winners claimed the record-setting prize.

EuroMillions, on the other hand, has a jackpot cap of €240 million. Once the jackpot reaches the cap, it cannot grow any larger and money from ticket sales that would be added to the jackpot is added to the second prize category instead. Although, until the EuroMillions jackpot reaches its cap, it is progressive.

The exciting daily lottery New York Take 5 is an example of a Pari-Mutuel lottery with a non-progressive jackpot. If no one wins the jackpot in any given draw, it does not roll over and grow. Instead, the jackpot amount is added to the next prize category in which there is a winner. The winner or winners in that category then share the whole amount, the original amount plus the jackpot amount, evenly.

Putting it All Together

You might come across these terms if you read the rules or fine print of a lottery. These terms are good to know and understand as they will help you understand more about the many different lotteries on theLotter. Pushing beyond the jackpot, which rightfully gets a lot of attention, and understanding how lotteries are designed and work is not only fun and rewarding, but can also give a player excellent insight into which ones are the best games to play.

One important thing to remember is that these terms are not mutually exclusive - a lottery can be Pari-Mutuel, with a progressive jackpot, yet have guaranteed prizes. Or, pretty much any other combination of the above. It is always possible to find ‘ifs’, ‘buts’, and caveats in the rules of any given lottery. That is one of the things that makes playing the lottery so exciting!

Put Your Knowledge to the Test

They say knowledge is power, but we like to say, ‘knowledge is money!’ Armed with these new terms and lottery expertise, as well as knowing the chances of winning the lottery, go find the games you want to play!