Introduction

Lotteries may seem to be easy on the surface - purchase a ticket, cross your fingers, and hope to hit the jackpot. However, any person in this business will be aware that it is a lot more complex. Beneath these shiny advertisements and lottery cards is an impenetrable tangle of legislation, licensing paradigms and compliance pitfalls.

For startup founders, consultants, and operators, these rules aren’t just background noise. They determine the way products are constructed, the rate at which companies can grow, and in a few instances, the feasibility of a business. What is legal in one nation may be a criminal offence in another country. Getting the landscape wrong does not merely cost in terms of revenue that it would otherwise have generated, it can also cost in terms of fines, lawsuits or even banishment to a market.

If you’re new to this space, it’s useful to start with a basic introduction to lotteries or explore lottery prize divisions before diving into the global legal landscape.

Here is a country-by-country overview of the lottery legislation differences, and more to the point, the implications of the lottery legislation as it relates to building or advising in this area.

United States: A Patchwork that Demands Patience

The US market is also among the hardest markets to crack. Every state creates its own regulations which implies that there is no playbook to national growth. In New York, it might be legal, but in Utah, the same thing might be illegal.

Big ones such as the California lottery are a billion-dollar machine. There is plenty of scope for lottery technology services and service providers that can assist state lotteries in modernising payments or distribution.

The thing is, however, that federal tax may take 37 percent (progressive top bracket), plus state tax, of the winning. That is counterproductive to consumer appetite. And since interstate selling is prohibited, cross-border scaling is slow and costly.

B2C should not be the first thing to venture into the U.S. unless you are already a deep-pocket and politically established business. B2B partnerships at the state level - the sale of compliance tools, the sale of technology, or infrastructure is smarter.

• Market Size - USD 64.15 billion (2024)
• Average Number of Operators - ~48 (state and territory lotteries)

Sources: U.S. Lottery Market Size & Outlook, 2024-2030, TurboTax - Tallying Up the Taxes on Lottery Winnings, Lotteries in the United States

United Kingdom: Gold Standard for Compliance

In case there is a market that regulates best, it is the UK. The Gambling Commission has a reputation of being aggressive yet very open and operators who have demonstrated this here would gain worldwide reputation.

National draws, charity lotteries, and online channels exist in a harmonious atmosphere with obvious rules. The system is trusted by consumers and this results in ease of acquiring customers as compared to most markets.

The downside? Advertising repressions are inhuman. Startups that pursue aggressive expansion must walk a fine line, any wrong move might attract fines in a very short time.

I perceive the UK as the ideal credibility market. When you desire the investors or friends to be interested in you, then success in this regard becomes a powerful calling card. Popular draws like Set for Life even have guides, such as how to play Set for Life lottery.

• Market Size - Over USD 17 billion (2024)
• Tax Rate - 12 per cent lottery tax levied on purchase of tickets (no tax levied on the winnings)
• Average Number of Operators - One National Lottery operator and hundreds of licensed society lotteries or small society operators

Sources: Grand View Research - UK Lottery Market Size & Outlook

Canada: Great for Players, Tricky for Operators

Canada is a dream to consumers - tax-free gambling. However, it is not so easy with operators. The running of lotteries is at provincial levels and the running of own games by the companies is not possible by the private companies.

There are still angles. Other provinces such as Ontario and BC are more willing to be digitally collaborative. Assuming you are in the tech, distribution, or compliance business, you can find a middle ground with regulators rather than fight them off.

Do not attempt to introduce an independent lottery here. The wiser thing would be B2B cooperation with provincial operators.

• Market Size - USD 16.47 billion (2024)
• Tax Rate - Winnings are tax-free (investment income subject to tax)
• Average Number of Operators - 5 large provincial operators

Sources: Canada Lottery Market Size & Outlook, 2024-2030, Wikipedia - Interprovincial Lottery Corporation.

India: A Market of Contradictions

India is a country with a scale few other countries can boast a vast consumer base and it is rapidly going digital, not to mention that the country has a long tradition of lottery games. But the rules are messy. Other states (Kerala, Maharashtra) operate lotteries in open conditions. Others ban them outright.

The play online is in a grey zone. Offshore sites do grab Indian players, but technically, they do not. That is a risky gamble to start-ups who do not wish to be put under the microscope of regulators.

In India, you are thinking of a long game. The chance is very real, but until now the least risky areas are B2B - compliance tech, payments, fraud prevention, rather than direct-to-consumer lottery solutions.

• Market Size - USD 27.37 billion (2024)
• Tax Rate - Winnings taxed at 30 per cent
• Average Number of Operators - ~13 state operators on average

Sources: India Lottery Market Size & Outlook, 2024-2030, Income Tax on Lottery Winnings in India - Kanakkupillai, Tax2Win - Guide to lottery income tax.

Australia: Heavy on Responsibility

The lottery market of Australia is well-regulated, and there are national lotteries such as Oz Lotto and Powerball in Australia, as well as charity ones. Regulators place strong emphasis on responsible gambling, requiring operators to build responsible play features into their platforms.

It is a stable, but not explosive opportunity. If you can meet the high standards here, you will be well-prepared to enter and compete in other mature markets.

• Market Size- Over AUD 5-13 billion per year
• Tax Rate - Tax free (paying taxes on investment income)
• Average Number of Operators - Few large state-based operators (The Lottery Corporation, Lotterywest)

Sources: IBISWorld - Lotteries in Australia Industry Report, LinkedIn - Australia Legal Lotteries Market Outlook.

Japan: Stable but Closed

The lotteries ( Takarakuji ) in Japan are a government run and a highly traditional lottery. Classic products such as scratch cards, numbers games are still popular with the consumers.

Foreigners are also allowed to take part on a legal basis although this is strictly checked. It is not readily available on-line and the system is not very welcoming to outsiders.

I find Japan rather of a growth play and more of a credibility boost. When you are able to develop relationships here you get long-term trust but not fast victories.

• Market Size - USD 12.33 billion (2024)
• Tax Rate - Tax-free (gift tax is imposed in some instances)
• Average Number of Operators - Lotteries are sold by prefectures and cities but coordinated under a central structure

Sources: Japan Lottery Market Size & Outlook, 2024-2030, Japan-Zone - Lottery Culture.

Brazil: Opening Up, Slowly

Brazil had been a federal monopoly of Caixa Economica Federal. This changed in 2020, when states were permitted to conduct their lotteries. This appears to be a huge opening on paper.

In reality, progress is slow. The entry of private operators is still restricted and compliance is still expensive.

• Market Size - USD 2.85 billion (2024)
• Tax Rate - withhold tax of approximately 15 percent on winnings (some items to 30 percent)
• Average Number of Operators - Federal Caixa + increasing numbers of state lotteries

Sources: Brazil Lottery Market Size & Outlook, 2024-2030

Cross-Border Play: The Grey Zone

There are websites like TheLotter and Jackpot.com that let people buy tickets from one country to another, but their legality entirely depends on the laws in the country of their residents. This is a mine field to the operators.

It is not the demand of customers that is the real problem, but compliance and payments. The winnings on the other side of the borders may lead to a two-tax situation, or demand physical claims or stay in the grey sphere of the law. This is where opportunities lie for lottery compliance solutions and global fraud prevention tools.

This is where I feel there is a gap: compliance as a service - to play internationally. Startups that find a way to solve such a pain point could find an opportunity to slice a pie.

What the Industry Should Take Away

As to our fellow lottery space members, be it as founders, advisors, or regulators, the following are the main lessons learned:

• There’s no universal model. Each nation has its peculiarities
• It is no longer optional to comply. The regulators are increasingly getting organized on the international level
• The biggest opportunities are in lottery app development solutions, fraud prevention, and cross-border compliance technologies
• This business is profitable and at the same time savage. The winners will be not the people who hit jackpots but the ones who are the operators, consultants and technology providers who are able to wade, with an ability to adapt and foresight, the regulatory complexities

TO THE NEW’s Lottery Solutions believes in empowering businesses with iGaming software development, lottery compliance consulting, and scalable digital lottery transformation services. If you’re scaling up across borders or modernizing existing systems, our expertise ensures your lottery business comes with the highest levels of compliance, security, and future-proofing.