Audit finds digital lottery games drive sales as education share fall
Digital instant games generated $2.6 billion in fiscal 2025, but their higher prize payouts contributed to a decline in the percentage of lottery sales transferred to education.
RALEIGH — Digital instant games have helped drive a sharp increase in North Carolina Education Lottery sales while reducing the percentage of sales transferred to education, according to a state performance audit released Tuesday.
Lottery sales increased 51% in two years, rising from $4.3 billion in fiscal 2023 to $6.6 billion in fiscal 2025, the North Carolina Office of the State Auditor reported.
During the same period, the percentage of sales transferred to the state Education Lottery Fund fell from 23% to 16%.
The dollar amount transferred increased from $1.02 billion in fiscal 2023 to $1.09 billion in fiscal 2024 before declining to $1.08 billion in fiscal 2025. The lottery has distributed $12.3 billion to education programs since its inception, according to the audit.
Auditors attributed much of the change to the rapid growth of digital instant games, which resemble slot-machine games and carry an approximate prize payout rate of 87%. Digital instant-game sales grew from zero in fiscal 2023 to $2.6 billion in fiscal 2025, accounting for about 40% of all lottery sales.
Prize expenses increased from 66% to 76% of gross sales as digital games expanded, traditional lottery-product sales declined and the lottery offered more games with higher payout rates.
North Carolina law sets a target of transferring approximately 38% of lottery revenue to education “to the extent practicable,” but the target is not mandatory.
The auditor’s office said state lottery laws were not developed with digital instant games in mind. Auditors recommended that the lottery work with the General Assembly to clarify its primary policy objective.
Lawmakers could direct the lottery to prioritize the total amount transferred to education, establish a minimum transfer percentage or balance both goals through a defined policy framework.
Lottery officials agreed to review the findings with the North Carolina State Lottery Commission and meet with legislative leaders about possible changes.
The auditor’s office disclosed that the state auditor appoints one member of the Lottery Commission.
Editor’s note:
This article was drafted with the assistance of artificial intelligence and was reviewed and fact-checked by a member of the NC Political News editorial team before publication.
