Players see higher payouts after digital trend takes off

By Kate Northrop

An audit of the North Carolina Lottery revealed that the state saw a slight decline in contributions to the education fund from last year, although the Lottery reported higher ticket sales.

A growing digital trend has impacted the percentage of lottery dollars transferred to the state for public education.

More specifically, the North Carolina Lottery brought in $4.3 billion in gross sales in Fiscal Year 2023, which ballooned to $6.6 billion in 2025. However, the percentage of sales transferred to the state fell from 23% in 2023 to 16% in 2025.

The audit credits the decrease in the percentage of sales contributed to three factors: growth of digital instant games, a decline in sales for traditional games, and a greater availability of lottery games with higher payouts.

The sheer growth in sales between 2023 and 2025 could easily be attributed to the introduction of new digital instant games, while contributions essentially flatlined between 2024 and 2025 from $1.09 billion to $1.08 billion.

The share of proceeds going to the state decreased because the digital instant games return a much larger share of every sale to players. Those games are designed with a payout rate of about 87%, meaning that roughly 87 cents of every dollar spent goes back to players in prizes rather than to the state fund.

Prize expense at the North Carolina Lottery climbed from about 66% of gross sales in 2023 to 76% in 2025. Players are winning more of the pot, which accounts for why the fund's share has slimmed down as a percentage while not noticeably causing a huge dent in the actual figure for contributions to the state.

The rise of digital instants tells its own story. The games didn't exist in Fiscal Year 2023, and two years later, they were pulling in $2.6 billion in sales — roughly 40% of everything the Lottery sold. Traditional tickets, such as scratch-off and draw games, saw a decrease in revenue from about $4.3 billion to just under $4 billion over the same time period as more players reached for their phones rather than a ticket at the counter.

North Carolina state law sets a target for the Lottery to transfer about 38% of its revenue to the Education Fund "to the extent practicable." It's a guideline rather than a hard rule. On average, the Lottery has maintained a long-term average of about 27%, the audit says.

"State laws guiding and regulating the Education Lottery were not initially designed with digital instant games in mind," State Auditor Dave Boliek said in the report. "As a result of the findings, auditors recommend that the NCEL work with the General Assembly to clarify North Carolina's primary strategic objective for the Education Lottery. Specifically, a strategic decision is required to determine whether the NCEL's primary objective is to maximize total dollars transferred to the Education Fund, maintain a specified minimum percentage to transfer to the Education Fund, or balance both objectives through clearly defined policy framework."

Thanks to tward28 for the tip.