Is buying a lottery ticket considered an investment?
There is a clear difference between investing and gambling.  When you invest, you are purchasing an asset that has value. It is purchased in the hopes that the asset will either increase in value or generate income. This definition holds true whether you are investing in shares of stock, in real estate, or in a comic book collection. You can also purchase debt: if you loan money, you own debt that will (hopefully) be repaid and generate income.  Gambling is playing a game for chance. When you gamble, you have not purchased an asset; you have only paid to participate in a game. Some games have a degree of skill (blackjack, poker), others are pure chance (slot machine). In most gambling games, the odds are against the player and in favor of the one running the game.  Lottery tickets, without a doubt, are gambling.  There is a good article on Investopedia that discusses the difference between investing and gambling in more detail.  One thing that this article discusses is the house edge, or the advantage that the people running a gambling game have over the players.  With most casino games, the house has an advantage of between 1 and 15% over the players.  With a typical lottery, the house edge is 50%. To address some of the points made by the OP's recent edit and in the comments: I do not think the definitions of investment and gambling need to be dependent on expected value.  There can be bad investments, where the odds of a good result are low.  Similarly, there could be gambling games where the odds are in the player's favor, either due to the skill of the player or through some quirk of the game; it's still gambling. Investing is purchasing an asset; gambling is a game of chance. I do not consider a lottery ticket an asset.  When you buy a lottery ticket, you are just paying a fee to participate in a game.  It is the same as putting a coin in a slot machine.  The fact that you are given a piece of paper and made to wait a few days for the result do not change this. Assets have inherent value.  They might be valuable because of their ability to generate income (stocks, bonds, debt), their utility (precious metals, commodities, real estate), or their desirability as a thing of beauty (collectibles), for example.  A lottery ticket, however, is only an element of a game.  It has no value other than in the game. "This question feels like an EL&U question to me, and so I will treat it as one. Investment, noun form of to invest, originally from the Latin investire, meaning to clothe, means: [T]o commit (money) in order to earn a financial return Merriam-Webster Online Dictionary, Invest, vb. tr., definition 1 As such, when a person commits money with the purpose of earning a financial return, they are investing.  Playing the lottery, when done so for the purpose of financial return, would fall under this definition - even if it's a poor choice.   Gambling, verb tense of to gamble, likely originally from the word gamen, meaning to play, means: a :  to play a game for money or property b :  to bet on an uncertain outcome Merriam-Webster Online Dictionary, Gamble, vb. itr., definition 1 Playing the lottery is clearly gambling (as a lottery is a game, by definition). The second definition could well include investing in the stock market, particularly certain kinds of investments (derivatives, currency speculation, for example). Aside from the definitions, however, normal usage clearly favors investment to be something with an expectation of positive return, while gambling is taking a risk without that expectation (rather with the hope of positive return).  Legally, as well, playing the lottery is not something that is considered investment (so it is taxed differently).  However, the question was ""Can"", and by definition, clearly it can be (assuming you are not asking legally)." From a mathematical expected-value standpoint, there is no difference between gambling (e.g. buying a lottery ticket) and investing (e.g. buying a share of stock).  The former probably has negative expected value while the latter probably has positive expected value, but that is not a distinction to include in a definition (else every company that gives a bad quarterly earnings report suddenly changes categories). However, investment professionals have a vested interest in claiming there is a difference; that justifies them charging fees to steer you into the right investment.  Consequently, hair-splitting ideas like the motive behind a purchase are introduced.  The classification of an item to be purchased should not depend on the mental state of its purchaser. Depending on the situation, it may be right to engage in negative EV behavior.  For example, if you have $1000 and need $2000 by next week or else you can't have an operation and you will die (and you can't find anyone to give you a loan).  Your optimal strategy is to gamble your $1000, at the best odds you can get, with a possible outcome of $2000.  So even if you only have a 1/3 chance of winning and getting that operation, it's still the right bet if you can't find a better one. "Why must terms must be mutually exclusive?  This (false) dichotomy is what seems to cause the most debate.  It is the SINGLE EVENT OUTCOME that defines gambling. Gambling will involve an aleatory contract. That is, the outcome is specifically tied to a single event that determines profit/loss. This could be the outcome of a race or the roll of a dice, but should involve chance.  This is why gambling is often in the context of a game, but I would make the argument that some investment tools fall into this category - The price of a stock at a certain date, for example. This may also be called ""betting"", which opens up a whole other discussion. Investing has no such implication, and as such it is the broader term.  Investing is to put something (money) to work to return a profit. Some forms of gambling could fall under this umbrella. Some would say that is a ""bad investment"" and even if they are right, it may still be the desire and intent of the investor to make a profit.  Not all gambling falls under investing. You can gamble for pleasure.  The profit/loss of most investments are not contractually tied to a specific event or outcome (e.g. the price of a stock over 10 years is the result of many events affecting its market value). Such an investment would not be considered gambling." "logically, yes. legally, no. any reasonable definition of an ""investment"" must include some types of gambling and insurance. lottery tickets specifically are really crappy high risk/high return investment.  obviously most people try to avoid investments with a negative average expected future value, but from a purely semantic perspective anything with a potential future value is an investment. conversely, anyone with a gambling problem should not pretend they are not gambling when making focused investments in high volatility stock options. that said, the irs taxes gains and losses differently depending on whether they are classified as ""gambling"", or just ""crappy investing"". so you will not be able to deduct your gambling losses from your earned income (unlike investment losses which can be deducted up to 3k$ per year)." "I am reminded of a dozen year old dialog. I asked my 6 year old, ""If we call a tail a leg, how many legs does a dog have?"" She replied, ""Four, you can call it anything you want, but the dog still has four legs.""  Early on in my marriage, my wife was heading out to the mall, and remarked that she was ""going to invest in a new pair of shoes."" I explained to her that while I was happy she would have new shoes to wear, words have meaning, and unless she was going to buy the ruby red slippers Dorothy wore in the Wizard of Oz, or Elvis' Blue Suede Shoes, her's were not expected to rise in value and weren't an investment. Some discussion followed, and we agreed even the treadmill, which is now 20 years old, was not an 'investment' despite the fact that it saved us more than its cost in a combined 40 years of gym memberships we did not buy.  In the end, no one who is financially savvy calls a lottery ticket an investment, and few who buy them acknowledge that it's simply throwing money away." "Although this has been touched upon in comments, I think the following line from the currently accepted answer shows the biggest issue: There is a clear difference between investing and gambling. The reality is that the difference isn't that clear at all. Tens of comments have been written arguing in both directions and looking around the internet entire essays have been written arguing both positions. The underlying emotion that seems to shape this discussion primarily is whether investing (especially in the stock market) is a form of gambling. People who do invest in this way tend to get relatively emotional whenever someone argues that this is a form of gambling, as gambling is considered a negative thing. The simple reality of human communication is that words can be ambiguous, and the way investors will use the words 'investments' and 'gambles' will differ from the way it is used by gamblers, and once again different from the way it's commonly used. What I definitely think is made clear by all the different discussions however is that there is no single distinctive trait that allows us to differentiate investing and gambling. The result of this is that when you take dictionary definitions for both terms you will likely end up including lottery tickets as a valid form of investment.  That still however leaves us with a situation where we have two terms - with a strong overlap - which have a distinctive meaning in communication and the original question whether buying lottery tickets is an investment. Over on investorguide.com there is an absolutely amazing strongly recommended essay which explores countless of different traits in search of a difference between investing and gambling, and they came up with the following two definitions: Investing: ""Any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descending order of importance): sufficient research has been conducted; the odds are favorable; the behavior is risk-averse; a systematic approach is being taken; emotions such as greed and fear play no role; the activity is ongoing and done as part of a long-term plan; the activity is not motivated solely by entertainment or compulsion; ownership of something tangible is involved; a net positive economic effect results."" Gambling: ""Any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descending order of importance): little or no research has been conducted; the odds are unfavorable; the behavior is risk-seeking; an unsystematic approach is being taken; emotions such as greed and fear play a role; the activity is a discrete event or series of discrete events not done as part of a long-term plan; the activity is significantly motivated by entertainment or compulsion; ownership of something tangible is not involved; no net economic effect results."" The very interesting thing about those definitions is that they capture very well the way those terms are used by most people, and they even acknowledge that a lot of 'investors' are gambling, and that a few gamblers are 'investing' (read the essay for more on that). And this fits well with the way those two concepts are understood by the public. So in those definitions normally buying a lottery ticket would indeed not be an investment, but if we take for example Vadim's operation example If you have $1000 and need $2000 by next week or else you can't have an operation and you will die (and you can't find anyone to give you a loan). Your optimal strategy is to gamble your $1000, at the best odds you can get, with a possible outcome of $2000. So even if you only have a 1/3 chance of winning and getting that operation, it's still the right bet if you can't find a better one. this can suddenly change the perception and turn 'gambling' into 'high-risk investing'." "Buying lotteries tickets makes you the fish not the fisher. Just like casinos or drugs. If you like, you can call buying tickets an ""investment"" or better yet, a donation in the lottery's owner wealth. No real investor is dumb enough to get into a business where 99.9999999% of the ""investors"" lose EVERYTHING they invested. Besides, a real investments means BIG money. You can call it so if you are ready to sell your house and buy tickets of all those money, but still, the risk is so high that it's not worth it." Something that is missing from the discussion is the actual market for the lottery ticket -- if a market existed for the tickets themselves, that would make this far more obvious, but since there isn't one; buying a single ticket gives different Expected Values, but since the ticket has a defined 'game' instance, a single ticket is a gamble. Playing the lottery in the long run could be part of a high risk investment portfolio. [edited for clarity]
"Situation #1: I keep playing, and eventually earn 1000 PED. I withdraw   this. Will I get taxed? If so, by how much? This is probably considered an ""award"", so whatever your country taxes for lottery/gambling winnings would be applicable. If there's no specific taxation on this kinds of income - then it is ordinary income. Situation #2: I deposit $5000, play the game, lose some money and   withdraw PED equal to $4000. Will I get taxed? If so, by how much? Since it is a game, it is unlikely that deducting losses from your income would be allowed.  However, the $4000 would probably not be taxed as income (since you are getting your own money back). Situation #3: I deposit $5000 and use this to buy in-game items. I   later sell these items for massive profits (200%+, this can happen   over the course of 2 years for sure). I withdraw $10000. Will I get   taxed? If so, by how much? Either the same as #1 (i.e.: ordinary income) or as capital gains (although tax authority may argue that this was not a for-profit investment, and capital gains treatment shouldn't be applicable). Will I get taxed on withdrawals from Real Cash Economy games? And do   the taxes apply to the full withdrawal, or only on the profits? Or   only on the profits above a certain amount? Generally income taxes only apply on income. So if you paid $10000 and got back $12000 - only the $2000 is considered income. However some countries may tax full amounts under certain conditions. Such taxes are called ""franchise taxes"". For a proper tax advice consult with the locally licensed tax adviser." A large number of the general population spends the huge of their cash to purchase lotto tickets and further on some mystery frameworks that offer ensured to win lottery money. The Global Lottery deals ascend to $300 billion for each annum. Take this game as stimulation, not as a source of income since it doesn't ensure that you win. Our lotto e-book motto is to show people how to win small prizes on a regular basis. Easy. Start with 2 millions and lose only one. Jokes aside, if you want a million USD, you should be asking yourself how you can produce products or services worth $5 millions. (expect the extra to be eaten up by taxes, marketing, sales, workforce...) If by investment you mean making risky bets on the stock market, you might have a better time going to Las Vegas. On the other hand, if by investment you mean finding something that will produce $$$ and getting involved, it's a different matter. If you hold a future plus enough cash collateral it is economically equivalent to owning the underlying asset or shorting the underlying asset. In general financial assets such as stock indices have a positive expected return - that's the main difference between investing and gambling. There's nothing that special about futures, they are just another contractual form of asset ownership.  Well, one difference is that regulations or brokerages allow individual investors more leverage with options and futures than with straight borrowing. But this is more a regulatory issue than a conceptual issue with the securities themselves. In theory regulators or brokers could require you to hold enough collateral to make a future equivalent to buying the underlying. "When you invest in a property, you pay money to purchase the property. You didn't have to spend the money on the property though - you could have invested it in the stock market instead, and expected to make a 4% annualized real rate of return or thereabouts. So if you want to know whether something's a ""good investment"", ask whether your annual net income will be more or less than 4% of the money you put into it, and whether it is more or less risky than the stock market, and try to judge accordingly. Predicting the net income, though, is a can of worms, doubly so when some of your expenses aren't dollar-denominated (e.g. the time you spend dealing with the property personally) and others need to be amortized over an unpredictable period of time (how long will that furnace repair really last?). Moreover your annualized capital gain and rental income is also unpredictable; rent increases in a given area cannot be expected to conform to a predetermined mathematical formula. Ultimately it is impossible to predict in the general case - if it were possible we probably would have skipped that last housing bubble, so no single simple formula exists." You're confused because the source you cite leaves out one number that isn't relevant to the argument they're making: total costs. The number you're expecting, $9 x 365 or $3285 is the total cost of buying the jewelry which, when subtracted from the $3650 sales volume gives us the net profit of $365.  The investment is the amount of money original put into a system our company. In this case the merchant bought his first piece of jewelry for $9, sold it for $10, took one dollar in profit and used the other 9 to reinvest by buying a new piece of jewelry. We can extend the analogy further. After 9 days of selling, the merchant will posses $18, allowing him to now buy 2 pieces of jewelry each morning and sell them for $20. Every day his costs will be $18 and he'll turn a $2 profit, all with the original investment of $9. Although I am not a tax professional, and in this case you would be better off with a professional advice, my understanding (at least of Arizona, New York and California individual tax regulations that I've been dealing with) is that you only pay taxes in the state in which you're domiciled.  Lottery winnings are payed by States/State-run corporations and as such sourced to the State that pays it. Buying a ticket in SC links you to the lottery run in that State, even if you live in another. You'll be claiming your winnings in SC, not in NC, and the winnings will be sourced to SC, not NC. As such SC will be taxing them. NC will be taxing them as well, since you're NC resident. A lot of these answers are really weak. The expected value is pretty much the answer.  You have to also though, especially as many many millions of tickets are purchased--make part of the valuation the odds of the jackpot being split x ways. So about 1 in 290--> the jackpot needs to be a take-home pot of $580 million for the $2 ticket. Assume the average # of winners is about 1.5 so half the time you're going to split the pot, bringing the valuation needed for the same jackpot to be $870 million. It's actually somewhat not common to have split jackpots because the odds are very bad + many people pick 'favourite numbers'. Speculation means putting your money on a hunch that some event may occur, depending on current circumstances and some future circumstances. So either you win huge or lose a lot. Investment is a conscious decision made on well defined research and grounded on good reasons i.e. economy, industry, company reports etc.  Here is a link on wikipedia with more details on  Speculation. I think playing certain kinds of lottery is as economically sound as buying certain kinds of insurance.  A lottery is an inverted insurance. Let me elaborate.  We buy insurance for at least two reasons. The first one is clear: We pay a fee to protect ourselves from a risk which we don't want to (or cannot) bear. Although on average buying insurance is a loss, because we pay all the insurance's office buildings and employee's salaries, it still is a reasonable thing to do. (But it should also be clear that it is unreasonable to buy insurance for risks one could easily bear oneself.) The second reason to buy insurance is that it puts us at ease. We don't have to be afraid of theft or of a mistake we make which would make us liable or of water damage to our house. In that sense we buy freedom of sorrow for a fee, even if the damage wouldn't in fact ruin us. That's totally legitimate. Now I want to make the argument that buying a lottery ticket follows the same logic and is therefore not economically unreasonable at all. While buying a lottery ticket is on average a loss, it provides us with a chance to obtain an amount of money we would normally never get. (Eric Lippert made this argument already.) The lottery fee buys us a small chance of something very valuable, much as the insurance frees us from a small risk of something very bad. If we don't buy the ticket, we may have 0% chance of becoming (extremely) rich. If we buy one, we clearly have a chance > 0%, which can be considered an improvement. (Imagine you'd have a 0.0000001% chance to save the life of a loved one with a ticket who'd be 100% doomed otherwise. You'd bite.) Even the second argument, that an insurance puts us at ease, can be mirrored for lotteries. The chance to win something may provide entertainment in our otherwise dull everyday life. Considering that playing the lottery only makes sense for the chance to obtain more money than otherwise possible, one should avoid lotteries which have lots of smaller prizes because we are not really interested in those. (It would be more economical to save the money for smaller amounts.) We ideally only want lotteries which lean on the big money prizes. No. You owe taxes in the state you made the money. So unless you can convince the lottery company to retroactively move to Puerto Rico or such, you can't. As others said, if you win, that should not be your worries.. Firstly, playing the lottery is not investing it is gambling. The odds in gambling are always against you and with the house.  Secondly, no one would ever give you a payout of 3 to 1 when the odds are 50:50, unless they were looking to give away money. Even when you place your chips on either red or black on a roulette table your payout if you are correct is 100% (double your money), however the odds of winning are less than 50%, there are 18 reds, 18 blacks and 2 greens (0 and 00). Even if you place your chips on one single number, your payout will be 35:1 but your odds of winning are 1:38. The odds are always with the house. If you want to play the lotto, use some money you don't need and expect to lose, have some fun and enjoy yourself if you get any small winnings. Gambling should be looked at as a source of entertainment not a source of investing. If you take gambling more serious than this then you might have a problem. "I think that the answer by @jkuz is good.  I'd add that the there's a mathematically precise difference:  Gambling games are typically ""zero-sum"" games, which means that every dollar won by one person is lost by another. (If there's a ""house"" taking a cut then it's worse than zero-sum, but let's ignore that for the moment.)   None of the markets that you mentioned are zero-sum because it's possible for both parties in the transaction to ""win"" since they typically have different objectives.  If I buy stock, I typically desire for it to go up to make money, but, if I sell stock, I typically sell it because I want the money to do something else completely.  The ""something else"" might be invest in another instrument if I think it's better or I'm rebalancing risk.  It might also be to buy a house, pay for college, or (if I'm in retirement living on my investments) to buy food.  If the stock goes up, the buyer won (increased investment) but the seller also won (got the ""other thing"" that they wanted/needed), which they would not have been able to get had there not been a buyer willing to pay cash for the stock. Of course it's possible that in some cases not everyone wins because there is risk, but risk should not be considered synonymous with gambling because there's varying degrees of risk in everything you do." "Gambling is perhaps not well defined, but it certainly doesn't include things like reality show winnings.   However, it is possible he could deduct something for this.  If the reality show qualifies as a ""hobby"", and his expenses exceed the 2% of AGI requirement, it's possible he could deduct those airplane tickets and such.  That deduction is explained in Publication 529." The satisfaction from gains packs less of an emotional impact than the fear of loss. It's very difficult for many people to overcome this fear, so when prices begin to fall, many investors sell to minimize their potential loss. This causes a further drop, which can lead to more selling as other investors reach their emotional threshold for loss. This emotion-based selling keeps the market inefficient in the short term. If there aren't enough value investors waiting to scoop up the stock at the new discount, it can stay undervalued for a long time.