How MIT Students Won $8 Million in the Massachusetts Lottery

MIT students figured out how to make winning the Massachusetts lottery a sure thing, and a recent investigation suggests that the lottery commission knew about it.

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Maybe Uncle Ben was right: With great power comes great responsibility. While most students at the famed Massachusetts Institute of Technology use their powers for good — for example, creating drugs that can fight any virus — others are busily using their prodigious math skills to game the state of Massachusetts’ lottery system, earning millions of dollars in the process.

Several years ago, while doing research for a school project, a group of MIT students realized that, for a few days every three months or so, the most reliably lucrative lottery game in the country was Massachusetts’ Cash WinFall, because of a quirk in the way a jackpot was broken down into smaller prizes if there was no big winner. The math whizzes quickly discovered that buying about $100,000 in Cash WinFall tickets on those days would virtually guarantee success. Buying $600,000 worth of tickets would bring a 15%–20% return on investment, according to the New York Daily News.

(MORE: When Good Things Happen to Good People: 8 Heartwarming Lottery Wins)

When the jackpot rose to $2 million, the students bought in, dividing the prize money among group members. But they didn’t stop there; they were so successful in their caper that they were eventually able to quit their day jobs and bring in investors to front the money they needed to purchase the requisite number of lottery tickets. Several other syndicates sprang up to capitalize on the Cash WinFall loopholes, but the MIT group remained one of the most successful and innovative. By 2005, the group had earned almost $8 million with its system, according to an investigation by the Boston Globe. By 2010, it had figured out how to win the entire jackpot in a single drawing.

(MORE: Watch: MIT Students Fight Nerdy Reputation with Charm School)

A recent report by the state’s inspector general reveals more details about the scheme, including the fact that the Massachusetts Lottery knew of the students’ ploy and for years did nothing to stop it. The inspector general’s report claims that lottery officials actually bent rules to allow the group to buy hundreds of thousands of the $2 tickets, because doing so increased revenues and made the lottery even more successful. While the students’ actions are not illegal, state treasurer Steven Grossman, who oversees the lottery, finally stopped the game this year.

The inspector general concluded that because lottery officials received no personal benefit from the syndicates’ manipulations of the game, no further action was necessary.

This isn’t the first time that MIT has been involved in a gambling controversy. Ten years ago, students and a professor were involved in a massive card-counting scandal in Las Vegas casinos.

MORE: MIT Researchers Create Star Trek–Style Needleless Injections
43 comments
Jer-ChauDay
Jer-ChauDay

These MIT students did nothing illegal or anything that would be terribly immoral for that matter so why the malicious way in which this article is written?

hardomardo
hardomardo

Wow man must be nice to be them!

www.AnonRights.tk

Random_Hall_alum
Random_Hall_alum

One thing I dislike about the reporting on this article is the claim that it was NECESSARY to buy $100000 in order to make a profit.  In fact, even a relatively small amount of money like $1000 was enough to earn $3000 back on the first drawing by one of these pools.  The rate of profit decreased as time went on and more people played, but the models I saw suggested (as was borne out by the returns over the course of 7 years) that you don't need to put in very much money to get a better than 1-1 rate of return with a 90% probability.

Disclosure: I'm good friends with some of the people who were involved in one of the pools and I put down $20 on the first drawing, $1000 on the second.

xiaoshiqing
xiaoshiqing

我记得上次有个新闻,一个炒黄金的利用工商银行的漏洞赚了2500多万人民币,最后银行判决把钱归还银行。。。。可恶,要是亏了这么多钱,估计这人就自认倒霉了,天朝不公啊,还得像老美学习啊 。。。。

Mysterious_81
Mysterious_81

If they can take billions from us then what's wrong if some of us can take millions from them?

Marilyn Schmett
Marilyn Schmett

Go MIT.  My daughter will be in the FPOP next week.  Hope u show her how to win a little to help with her tuition bill.

WilliamTremblay
WilliamTremblay

I hope I can win a big lottery jackpot like that someday. I've been spending a lot of time studying patterns and mathematical probabilities, and I think it's entirely possible. I won $10,000 once using a system I found online (here's a review if you're interested: http://gamblingsystemreviews.n... ) If you keep playing smart and not just picking completely random numbers, you'll win eventually.

Randall Bart
Randall Bart

MIT students have been making money off of gamblers since Claude Shannon.  

James Thung
James Thung

I just buy powerball lottery tickets in order to test God, saying "God, if you want me to go back into your services, then let me win a $300,000 lottery. I will pack up and go back to serve you the next day I receive the reward leaving the U.S.A and everything I admire behind. I don't depend on my wit, calculation and the amount of the acapital.

arariel
arariel

Not a scam. The lottery is the scam.

biologixco
biologixco

Now if they can just figure out how to get Mitt Romney's taxes released...

WilliamTremblay
WilliamTremblay

I hope I can win a big lottery jackpot like that someday. I've been spending a lot of time studying patterns and mathematical probabilities, and I think it's entirely possible. I won $10,000 once using a system I found online (here's a review if you're interested: http://gamblingsystemreviews.n... ) If you keep playing smart and not just picking completely random numbers, you'll win eventually.

30sProfessional
30sProfessional

This isn't a "scam." If they played by the rules, people need to stop hating. What gambling industries want is for people to turn off their brains, mindlessly and compulsively throw money at them, believing their "promises" and hoping for a nugget back.   If you make a game available, you cannot get mad because someone figured out how to beat it. That is what MIT students DO, they figure out problems. They beat a lottery game, so what?

hamboy
hamboy

I fail to see how buying multiple lottery tickets is a 'scam'. Stupid headline.

Joshua Kricker
Joshua Kricker

How is it a scandal or a scam. I don't see what's illegal abojut what they did. Wish I had the resources.

mmill928
mmill928

 Who said that nobody else was allowed to buy in bulk? Coworkers buy in bulk all the time. Looks like they just bought in bigger bulk.

lokiii
lokiii

by allowing the group to buy in bulk and no one else they changed the odds by buying the 100 grand at a time which guaranteed wins.  The whole contract of a lottery ticket is based on fair and equitable payouts.  By doing this what you are promising to the other players is fraudulent.

lokiii
lokiii

Technically having smarts and knowing how the system works is not a crime.  When the state turns a blind eye  and allows rules to be broken as far as ticket sales go, that my friend is collusion.  When both parties made this deal they knew they were cheating the other players by guaranteeing a jackpot to one party.  How they can think this is not against the law is beyond me. 

John Sheffield
John Sheffield

A spokesmen later said "Don't you get it?  Lotteries are a tax on poor people who are bad at math.  You MIT folks are violating the spirit of the whole process."

Laura Lee
Laura Lee

As far as I know they weren't doing anything illegal, why is the game being pulled out?

sac12389
sac12389

They are smart enough to know loopholes in the system and go through the loopholes, that isn't a crime. The article even says their actions weren't illegal, so why is this under the crime section? The MIT students did absolutely nothing wrong.

gracetoday
gracetoday

The old adage 'open a school close a prison'  seems to mean more and more that those who go to school know how to avoid prison.

MaryWaterton
MaryWaterton

The real scam is all those state employees drawing six-figure salaries with luxurious benefits and retirement ... all funded with money from the state's gambling operations.

I wonder if Warren Buffet would invest in a company whose main cash flow was based upon gambling? If not, then why are state governments doing it?

robert_paulson1
robert_paulson1

Utterly ridiculous title to this post. These students' tactics are not a "scam" or even unethical. Co-workers pool money to purchase lottery tickets ALL THE TIME and openly. The scandal is that Time Magazine apparently employs writers who don't understand how lotteries work. 

YankeeSkeptic
YankeeSkeptic

Congratulations to the MIT students who  continue to beat the rigged game known as "gambling"  e.g. the MA lottery that takes advantage of the dreams of "99%" and the state is guaranteed about 20% return on sales.

It's ironic that the MIT students, while they "did nothing illegal", are smeared by innuendo as doing something "bad", perpetuating a "scam" or "caper" by the Time and others.  

jleochuk
jleochuk

@James ThungHaha James very funny. There is only one way to test God with our finances!!!


jesuguru
jesuguru

"It is written, 'Do not put the Lord your God to the test.'"

bcfred
bcfred

If I'm someone who played the game while lottery officials knew it was being manipulated, I think I'd sign up for a class-action lawsuit. 

mmill928
mmill928

State lotteries generally do not fund employee salaries, except in cases such as police and firefighters. Most of the money helps fund community needs.

I've worked for the State of Wisconsin and the State of Washington, and absolutely nobody was making six figures.

Drew
Drew

apparently you've never heard of investment banking...

Tyson
Tyson

Jesus Christ, exactly. Unless math is illegal, I'm glad they beat the damn system.

Sasha Lopez
Sasha Lopez

how did you know the lottery was rigged? 

bcfred
bcfred

And of course your valiant public servants, who had no stake in the outcome, were happy to let it go on.  Who cares if the average player's chances of winning were greatly diminished?

Scott Wanamaker
Scott Wanamaker

It didn't decrease your overall chance of winning.  You would just end up splitting the pot if you won with the winning ticket number the MIT kids had.

xiaoshiqing
xiaoshiqing

新闻整天见大奖,可现实中就没听说过,连开奖视频都被质疑录像,坑爹啊 

Don James
Don James

to bcfred - they did not cheat and did not alter any other person's chance of winning in any way. They beat the "house" at a game rigged to favor the "house". They did this by purchasing tickets with many different number combinations. They put their own money at risk to play at certain times when the odds were in their favor. So the state wanted the dollars coming in because the payouts are only a small percentage of the gross ticket sales. Either you don't understand the basics of probability and the rules of chance - or you are just jealous they won and you didn't,  so you whine that they cheated. 

John Sheffield
John Sheffield

I do not have all the details, but, if I understand it correctly, the average player's chances of winning didn't change at all.

Karen Serocki
Karen Serocki

@facebook-520942356:disqus - the number of tickets in a Powerball lottery never matters. Your chances of picking the winning numbers are always 1 in 176 million. That's why you can have more than one winner of the Powerball.

I'm sorry, but if you don't understand this, I'm afraid there's no hope for you.

Matias Ocampo
Matias Ocampo

How can

chances don´t change when you have more players/tickets involved in the game

? chances should be less !