The first lottery games were instant tickets. In 1996, a weekly lotto game was introduced. In June 2006, the California Lottery joined the multi-state, Atlanta-based Mega Millions game. On 29 November 2012, the California Lottery Commission unanimously approved Powerball, which became available in April 2013. The Lottery games include eight different types, with the majority of sales coming from three of the most popular games – SuperLotto Plus, Mega Millions and Scratchers tickets. Lottery tickets can be purchased throughout California from more than 21,000 retailers.
In 1996, in response to a lawsuit filed by Indian tribes (Western Telcon v. California State), the California Supreme Court declared that the Lottery's implementation of keno was not a lawful lottery game. The ruling found that keno was a house-banked game, which at that time was illegal in California. Subsequently, California Attorney General Dan Lungren ruled that Daily 3, which at the time had fixed payouts, was also illegal because it created an interest in the state that fewer people win – unlike a lottery, where the operator has no stake in the decision. As a result, the Lottery modified keno and created Hot Spot, which has a pari-mutuel payout format, and modified Daily 3 to a pari-mutuel format, where payouts vary depending on the number of individuals who picked the winning numbers.
In 2007, California considered privatizing the Lottery in an effort to help solve budgetary problems. Gov. Arnold Schwarzenegger put forth the plan as part of a revised budget proposal. The plan was to lease the Lottery for up to 40 years to a private company in exchange for either a series of payments or a lump sum. The money was to help pay for universal health insurance. One of the main concerns regarding the plan was that privatizing the Lottery would eliminate a major revenue source in the future. In October 2007, during a Senate hearing on the matter, experts suggested that allowing video lottery terminals in the state would make the Lottery more attractive to potential bidders. In April 2008, to make the Lottery more appealing to private investors, the legislature proposed a referendum to authorize bigger jackpots and allow types of gaming that were banned at the time. None of the attempts to privatize the Lottery had any success, and the Lottery remains under state control.
In April 2008, Gov. Schwarzenegger signed Assembly Bill 1251, which ended a four-year legal battle over California's participation in the multi-state Mega Millions lottery game and its prize claim period of 180 days. The new law extends winners' ability to claim their prizes to one year after they have won.
In 2010, Gov. Schwarzenegger signed into law the 2009 Lottery Act Amendment, reallocating lottery revenues. The amendment required that an additional 3% of revenue be given back to the public, thus increasing the minimum return to the public to 87%. The amendment also mandated that the allocation of administration costs be capped at 13%. The Commission was required to pay prizes of no less than 50%. With these parameters, the Lottery was given the flexibility to pay out a higher percentage of its revenues in prizes than it had in the past, but only if it did so in a way that increased the total amount of money going to public education.
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