How lottery jackpots hit billions: The evolution of record-breaking prizes

What would you do with a billion dollars? That's a question that more and more lottery winners are asking themselves as jackpots continue to grow ever larger, and what was once unprecedented now becomes the new normal.

Before 2016, the biggest lottery prize in US history was $656 million. However, on January 16, 2016, a new era was born when three different winners stepped forward to claim a $1.5 billion Powerball jackpot, the first billion-dollar prize in lottery history.

Since that first ten-figure prize was awarded nine years ago, there have been twelve different billion-dollar winners, including Edwin Castro, who, in 2023, collected the first and, as of now, only multi-billion dollar jackpot.

It's no accident that lottery jackpots have suddenly increased from millions to billions. Changes to games like Mega Millions and Powerball are meant to increase jackpots but reduce the number of total winners.

This is how lottery jackpots grew to billions and why recent changes to the lottery mean we can probably expect even more massive prizes in the future.

Power limit

When Lotto America, the precursor to Powerball, was created in 1987, the organizers made a rule that would seem absurd today. They decided that the game would not have jackpots larger than $80 million. As the first multi-state lottery game, officials realized that jackpots had the potential for massive growth.

When introducing the rule, Ed Stanek, the director of Lotto America, told reporters:

There were concerns about what you could do with that money — like buy a small country or something.

It is safe to say that those concerns are long gone today.

When Lotto America first launched, jackpots were usually under $10 million. Players had to choose five numbers between 1 and 40; there was no Powerball number, and each ticket had a 1 in 19 million chance of winning the big prize.

However, in 1992, the game was rebranded as Powerball, and the rules were changed to increase the jackpot size. The June 14, 1995, drawing saw the first $100 million winners in lottery history when a group of workers from Dartmouth, Massachusetts, claimed a prize worth $111 million.

This milestone jackpot generated enormous publicity for Powerball and helped skyrocket its popularity with players.

Following the 1995 drawing, jackpots consistently broke the $100 million dollar mark, but organizers were surprised to see that after an initial burst of excitement, player enthusiasm began to die down. The problem was that even as prizes grew larger, players would get tired of the “new normal” and want even bigger payouts.

At the same time, instant win scratcher games were rapidly gaining popularity, taking lottery market share away from multi-state draw games such as Powerball and Mega Millions. The big draw games realized that massive jackpots were key to their popularity and set to work, growing them to unprecedented amounts.

Race to the top

Draw games decided to fight back, changing their own gameplay rules and pricing so they could build up larger jackpots faster.

The starting jackpot for Powerball increased from $2 million in 1992 all the way to $40 million by 2012. Mega Millions did the same; the starting jackpot went from $5 million in 1996 to $40 million by 2017. However, both games lowered the starting amount to $20 million during the COVID-19 pandemic because fewer people were buying tickets. As of the publish date of this article, minimums have been eliminated entirely, and now the starting jackpot is based on ticket sales before the first drawing.

Powerball and Mega Millions have also steadily increased the price of their tickets to drive up their prizes. Mega Millions went from $1 to $2 in 2017, and it was recently announced that the price would more than double to $5 in April 2025.

Similarly, the price of a Powerball ticket increased from $1 to $2 in 2012. Additionally, the Power Play option was introduced in 2021, driving the price of the most expensive ticket up to $3.

And while all of these factors definitely contributed to a rise in prize values, there was one final change that turbo-charged the growth of jackpots. The odds and structures of both games have changed dramatically over the years.

Powerball steadily increased the range of numbers that players had to choose from. When the game was first introduced, players only had to choose five numbers between 1 and 40. As the years went by, the range of numbers steadily increased until 2012, when players had to choose five numbers between 1 and 69 and also a Powerball number between 1 and 24.

The impact of these changes was that while it lowered the odds of winning any prize from 1 in 32 to 1 in 25, it increased the odds of winning the jackpot from 1 in 19 million all the way to 1 in 292 million.

The range of numbers steadily increased until, in 2017, it reached 70, although the Mega Ball number range decreased to 25. This decreased the odds of winning from just under 1 in 53 million in 1996 to 1 in 302 million today.

The result of all these different changes was that big prizes became harder to win, and jackpots grew faster, as can be seen in the rapidly increasing average jackpot prizes.

For example, between 2005-2007, the average Powerball jackpot was between $75-80 million. Between 2008 and 2009, that number went up to $115 million and by 2022-2024, the average jackpot hovered around $220 million.

These rule changes and increasing averages are what have led us to the modern era of billion-dollar jackpots.

Room to grow?

Now that we're in an era where lottery games average slightly more than one billion dollar prize per year, the question is whether we have reached the peak of billion-dollar payouts or if there is still room to see even more ten-figure jackpots.

Multi-state lottery games love billion-dollar jackpots for one important reason: the bigger the jackpot, the more tickets they sell. This is due to several factors.

1. Bigger jackpots lead to increased media coverage. This means numerous stories on traditional TV and news stations about the size of the prize, which usually also mentions the drawing date. Additionally, increased conversation on social media platforms raises awareness and can help drive people to buy more tickets when they see that their friends and relatives are also playing.
2. There is a psychological response known as the 'Lottery fever' effect, which is perhaps more commonly known as FOMO (fear of missing out). This means that as the prize grows larger, more people are driven to buy tickets because they fear losing the opportunity to win such a massive amount of money.
3. As the jackpot goes up, lottery tickets are perceived as being more valuable, even though the price and odds of winning don't change.
4. Participation in lottery pools and syndicates increases as the prize grows larger. As the jackpot gains zeroes, more casual players become interested in playing, and lottery ticket-buying groups become an easy way for them to participate in the drawing.

The people who run these games are well aware of all of these effects, and that's why they're constantly looking for ways to create bigger jackpots even faster.

This is why Mega Millions recently announced that the price of their tickets would increase to $5.

In a press release, Joshua Johnston, the Lead Director of the Mega Millions Consortium, explained the reasoning behind the price increase and upcoming rule changes:

We expect more billion-dollar jackpots than ever before, meaning creating more billionaires and many more millionaires as the jackpots climb; plus, this game will continue the important legacy of supporting great causes everywhere Mega Millions is played.

Tim Chartier, a professor of sports analytics at Davidson College, says that billion-dollar jackpots attract people who otherwise don't play the lottery and can be useful in creating new regular customers who get hooked on the excitement.

While Powerball hasn't announced any similar changes, if Mega Million's new changes work and they start to dominate the market, it's likely that Powerball will alter its own game to compete.

Interest keeps things interesting

There's another variable that has driven up the value of jackpots that has nothing to do with ticket prices or number ranges. While we usually think of interest rates in terms of borrowing costs and credit cards, they can have a big impact on lottery prizes as well.

Rising interest rates have actually driven up the value of lottery prizes for winners who select the immediate cash payout option, which they almost always do.

When winners select the thirty-year payment option, the lottery will buy an annuity, which is an investment vehicle that pays out a set amount of money every year. If a player selects the immediate cash payout, they'll receive the amount of money that it would have cost to buy that annuity.

The price of an annuity is partially determined by current interest rates. Lower interest rates make annuities cheaper, and higher rates make them more expensive. As interest rates have increased over the past few years, the expense of buying an annuity has gone up, and the value of the immediate cash payout has also increased.

So far, there has never been an immediate cash payout of one billion dollars. Edwin Castro, who won $2.1 billion from a 2023 Powerball drawing, came closest when he collected $998 million before taxes.

Who wants to be a billionaire?

The last billion-dollar lottery winners were husband and wife Cheng and Duanpen Saephan and their friend Laiza Chao, who won $1.3 billion playing Powerball in April 2024.

It takes approximately 2-3 months for a starting jackpot to build up to one billion dollars. Now you have the tools to check the biggest jackpots and guess how much longer before they go ballistic.