TL;DR scratch tickets aren't random, rather they are intentionally spaced out. The Texas lottery releases spacing info to the public. Once you have a regular lottery annuity (the first one was luck) you can spend vast sums on lottery tickets and write off your losses, so the public subsidizes your lottery purchases.
I saw that article and didn't link to it because it was rife with ridiculous statements and mathematically dubious speculation. They certainly didn't "figure it out".
One particular gem: they said that a game returning 66.9% of the money spent on it has a "remarkable" return - that's a loss of 33.1 cents on every dollar and would quickly render anyone playing it without a mathematical advantage bankrupt. They also suggested that such a return reduced variance in the game, apparently not understanding that this return includes the top, multi-million dollar prizes. They confused hit frequency with the return of the game.
The tax incentive thing is also ridiculous. While it is true that one may deduct their losses up to the amount of their taxable winnings, if she were playing without an advantage, she would still lose and this offered no help on beating odds of 1 in 18 septillion.
Finally, they could have handed her tickets for free all day and she should have only hit what she did every quadrillion years. There are literally not enough raw materials available on our planet to produce the 18 septillion tickets that should have been necessary to hit what she did - even if mankind devoted all of its resources to the project.
The best speculative theory is that she was able to deduce an approximation of the algorithm used to distribute the tickets, but again that is only speculation. She clearly figured something out; to say that this article nailed it, however, is a serious misstatement.
There are literally not enough raw materials available on our planet to produce the 18 septillion tickets that should have been necessary to hit what she did - even if mankind devoted all of its resources to the project.
This is a dubious statement, but if you believe it, don't you think it calls into question some of the "odds" that have been bandied about with no support?
Maybe "subsidy" is the wrong word, but she started out paying taxes on $300k of annuity income every year. If she bought e.g. $50k of scratchers in any particular year and didn't win anything, she lost $50k * (1 - top_tax_rate), not $50k. If I spend $50k on scratchers this year, I won't be able to write it off, because I've never made any money from the lottery, so my lottery spending will be considered a "hobby" rather than a "business".
If the losses cannot be written off, then you have this weird situation, where let's say in California you have a top tax rate of 52.9% combined, a person could've spent $500,000 on lotto tickets or raffle to win a $1 million and still end up with a loss.
Yeah that is definitely an issue. I think the boundary of acceptable write-offs is necessarily sort of fuzzy. Some things are obviously unacceptable, some things are obviously fine, and lots of stuff in the middle depends on the situation, on the discretion of IRS agents, and of course on the expertise of the CPA one hires to predict IRS decisions.
This particular situation reminds me of that of racehorse owners. Most owners will lose money in racing in any particular year. They hope to make enough in good years to break even over time. If there's never a good year, the IRS might eventually drop the "hobby" ax.
This is probably the biggest problem with the steady defunding of the IRS. They can still catch shameless cheaters like the morons who don't send in their employees' payroll deductions, in no small part because no CPA will touch that shit. CPAs are usually willing to discuss write-offs, however. The expansion of the set of acceptable write-offs is inherent to any income tax system, and since it has been left unchecked it has undermined the system we have.
The Philadelphia Inquirer figured it out:
http://www.philly.com/philly/news/nation_world/Lotterys_luck...
TL;DR scratch tickets aren't random, rather they are intentionally spaced out. The Texas lottery releases spacing info to the public. Once you have a regular lottery annuity (the first one was luck) you can spend vast sums on lottery tickets and write off your losses, so the public subsidizes your lottery purchases.