Iowa Lottery at 40: Scratching off $6.1B in prizes since 1985

Matt Strawn, CEO, Iowa Lottery 

Sales of the first Iowa Lottery tickets began in 1985 with a kickoff celebration at the Iowa State Fair. Forty years later, state fairgoers broke the Guinness World Record for the most people — 1,380 — to scratch lottery cards simultaneously, demonstrating the lottery’s journey from $1 scratch tickets to a multibillion-dollar enterprise.  

Since its launch was approved by the state Legislature and signed into law by then-Gov. Terry Branstad, the lottery has generated $10.4 billion in sales and paid out $6.1 billion in prizes. Lottery revenues support many state programs, returning $2.5 billion to the general fund and $42 million to the Iowa Veterans Trust Fund since inception. Players have won as much as $343.9 million, and redeemed 189 tickets worth $1 million or more since the game’s inception. Players who win $250,000 or more redeem them at the Iowa Lottery’s headquarters in Clive. Smaller prizes between $600 and $250,000 are redeemed at the lottery’s regional offices in Cedar Rapids, Mason City and Storm Lake, while prizes of $600 or less are redeemed at retailers. 

“We’re very fortunate to see a lot of people on their best day. There aren’t a lot of people who get to do that in their day-to-day jobs,” said Matt Strawn, who became the organization’s third CEO in 2019. The lottery’s first CEO was Edward Stanek and second was Terry Rich. 

Today, the Iowa Lottery functions as a statewide organization with tightly controlled security and logistics with 108 employees and 2,500 retail partners. The lottery brings in about $500 million in revenue annually and functions as part of the Iowa Department of Revenue. It’s overseen by a commission and reviewed annually by the state auditor’s office. 

Iowa State Auditor Rob Sand said reviewing state agency data, such as payroll records, helps prevent potential problems.

“When people know the auditor is coming and people know the auditor can look at what’s going on, that not only helps catch problems, but helps prevent them,” Sand said. 

Most of the lottery’s profits go to the state’s general fund to help pay for education, natural resources protection, health services, public safety needs and more. The first $2.5 million goes directly to the Iowa Veterans Trust Fund, which helps veterans pay for needed services. 

“It’s one of the quietest half-a-billion-dollar annual revenue enterprises in the state,” said Strawn, who grew up on his family’s farm in Benton County and has worked in many roles throughout the years. He spent 10 years on Capitol Hill, served as chairman of the Republican Party of Iowa, was co-owner of the Iowa Barnstormers Arena Football League team and an entrepreneur. 

“It’s a little more indirect,” he added, “but if you think of all the things that get funded by the Legislature that ultimately start with an Iowan purchasing a lottery product, I think about that value proposition when the state decided to have its lottery 40 years ago in 1985.” 

Under the hood: Increasing complexity

The Iowa Lottery has become exceedingly more complex throughout the years. Players can spend as little as 50 cents or as much as $50 per ticket to play scratch tickets. 

“About two-thirds of our total revenue comes from scratch tickets,” Strawn said. “That is the straw that stirs the drink that is the Iowa Lottery.”

Other games include non-scratch tickets and multistate games like the Powerball and Mega Millions, making for a lot of money exchanging hands. 

“The evolution of the state’s lottery, the complexity of the technology that undergirds the gaming system, I can’t imagine that was something that was remotely envisioned with that first simple paper ticket,” Strawn said.

For example, he added, someone who had a win on a lottery ticket in 1985 could only get paid out by the store that sold them that ticket. Now, he said, with cross validation, they can go to any lottery retailer and claim their prize.

Most people in the community see the celebration when someone wins a lottery jackpot, but there is much more to the organization than oversized checks. There are three separate companies that print lottery tickets. 

“[The public] sees the confetti cannons that go off when you’re giving away a million-dollar check, and the picture that’s in the paper, on the news or showing up in your digital feed, but when you peek under the hood at the lottery, you realize the amount of logistics that go into moving our product around the state,” Strawn said. 

To keep games relevant and appealing to the public, the lottery will produce new ticket styles and games periodically. Concept to market for new ticket styles is about six to eight months, including design, graphic art production, putting together a price structure and working with printers on the new design. Last winter, the lottery began selling a Pac-Man ticket and this past summer, dinosaurs donned the new Jurassic World scratch game. Licensing fees for tickets that incorporate major brands are expensive, so incorporating those types of tickets into the lineup is done infrequently. 

“We’re not immune to the rising input costs that everyone has felt, particularly with the print product. The logistics associated with transporting that product around, getting it to Ankeny where the central warehouse is and then distributing it out weekly to retailers,” Strawn said. “It’s a much more complex business when you think about everything that goes into putting that $5 scratch ticket on the counter.”

Earlier this year, the lottery partnered with Fareway stores to install technology to sell lottery tickets at checkout. Doing so meant integrating three software systems with varying code and security requirements: Fareway’s point-of-sale system, the national lottery gaming system and the Iowa Lottery’s central gaming system. It’s also a split tender system; because the lottery has age restrictions, tickets cannot be bought with credit cards. Tickets are printed on the same paper as grocery receipts, but printed separately. The national lottery system has developed a specific application programming interface, or API, for this purpose. 

“I can see a future where lottery functionality is embedded into the releases of those point-of-sale platforms,” said Strawn, who is also vice president of the board of directors of the Multi-State Lottery Association. 

Upping the ante on security

The lottery uses a predictive ordering system and a sales staff to determine which retailers need tickets replenished. Orders go to the organization’s Ankeny warehouse, are picked like in any typical warehouse and shipped out weekly. When tickets are sent to retailers, they are sent in secure bags yet they have no monetary value until they are checked in at a store. 

“Those tickets are effectively inert while they are in transport and in shipments. Then the individual retailer determines what their process is once those tickets arrive in store,” Strawn said. “Some retailers, depending on what their control process is, will wait for the lottery sales rep to come to the store to effectively hit the tickets with the [barcode reader], and the point-of-sale system activates those tickets and provides value to those tickets. Some stores will empower their own staff to do that, it depends on what their internal processes and accounting mechanisms are.” 

Lottery sales representatives visit retailers to check shipments and inventory levels and educate managers on promotions and compliance initiatives. There is also an investigations team, composed of former law enforcement officers, who conduct unannounced and undercover compliance checks of retailers and look into any theft allegations. They will work with corporate retail chain security personnel and communicate with local county prosecutors on issues. 

“There are all these little nuances that come with this product, and there is a constant effort to stay one step ahead of folks that maybe see the lottery as an easy target,” he said. “I would caution them, it is not.

“When you think of the sophistication that is built into the tracking of a lottery product; we have the ability to pinpoint if somebody steals a lottery product and tries to cash it in. Of course, most of the convenience stores or grocery stores these days have internal security footage that we’re able to draw upon.”

A conversation about Iowa Lottery security isn’t complete without mention of the Eddie Tipton scandal. Tipton, former information security director at the Multi-State Lottery Association, confessed to rigging random number generators to rig lottery drawings. In 2015, he was convicted of rigging a 2010 $14.3 million Hot Lotto drawing. He later confessed to rigging other drawings in multiple states. He was convicted and served a five-year prison sentence. 

“I think Iowans are well aware of the situation my predecessor had to navigate,” Strawn said. “They did everything right in catching someone who was attempting to defraud the lottery. If you think about what makes a lottery product distinct from arguably any other product on the shelf, it is a product that is inherently based on trust, and the minute a player, a consumer, doesn’t believe they have a fair opportunity to win a prize in that game, your entire product category is done. 

“There’s the importance of not just maintaining operational security and integrity of lottery drawings and lottery products, not just making sure that happens internally, but making sure lottery leaders are telling that story to players, to stakeholders, to the beneficiaries that rely on lottery proceeds. That is our currency, that we have to be able to make sure the games remain fair, the games remain honest, because at the end of the day, it’s causes like the Iowa Veterans Trust Fund that are relying on us to do that.”

Strawn said he doesn’t have any pro tips about which lottery games to buy and from what stores, because he doesn’t know. When a pallet of tickets arrives at the lottery’s warehouse, staff do not know what prizes are embedded into those tickets. 

“All that is completely randomized; we do not know how many top prizes are seeded into a game. We don’t know where in the stack they are. We have no visibility whatsoever whether those top prizes are still in the warehouse, or whether they’re sitting in a dispenser waiting for an Iowan to come in and have a great day,” he said.

Iowa Lottery uses a closed loop system that has no connectivity to the internet. A sophisticated random number generator is used for second-chance drawings that take place at the Lottery headquarters.

“We have a mirroring system, our [Internal Control System] ICS system that will make sure everything balances out, that there are no discrepancies in bets,” he said. “There is no longer any old-school ball drawing equipment that is used at the Iowa Lottery.” 

When a prize winner visits the lottery headquarters to collect, their name is cross-checked against state data to see if they have any outstanding debts, like unpaid child support, before they receive the money. Winners still receive prize money by check; mobile payment services such as Venmo are not used. 

For many years, lottery winners sent their winning tickets by postal mail to the Iowa Lottery headquarters, and lottery staff would send the prize money back to the winner. Technology updates allow lottery players to check their tickets at the retailer, or on an app, to see if they won and to confirm the prize amount. Amounts less than $600 can be redeemed at the retailer. This eliminates much of the postal mail that the lottery office handled, as well as the workload on retailers and others.  

“I have heard from my predecessors about these stacks and stacks of tickets that were mailed in,” he said. “Think of the inefficiency involved in processing those claims, and it isn’t just the convenience for players in processing those claims, but one benefit of technology is it provides greater protection to both lottery players and actually lottery retailers.” 

Technology upgrades have also allowed for second-chance drawings. Players take codes on non-winning tickets and enter them online to win alternate prizes, such as concert tickets. 

An economic indicator

Iowa Lottery sales were down last fiscal year. Strawn said lottery sales are dependent on jackpot totals. The volatility of multi-state jackpot games like Powerball or Mega Millions largely dictate sales. If the prize doesn’t meet a high enough threshold, people don’t buy in. 

“Our product portfolio, it ebbs and flows in a given year, driven largely by the volatility in Powerball or Mega Millions sales,” he said. “It’s a product that we don’t really have much ability to control sales on because we are to some degree at the mercy of the odds and whether that jackpot grows. Take a year like last fiscal year [2023-2024], where we saw five Powerball or Mega Millions jackpots that exceeded $1 billion for a top prize. During the fiscal year that just closed [2024-2025], we had one [major jackpot] and it was just after the holidays toward the close of calendar year 2024. Because of that disparity, year-over-year, in the size of jackpots, our Powerball sales were down over 50%. Unlike other products, you can’t drive sales simply with marketing and promotions alone. It’s wild to me that for many consumers and players, a $200 million jackpot, or a $400 million jackpot, isn’t enough for that $2 Powerball purchase.”

Lottery sales can serve as an economic indicator, he said, because as gas prices go up, ticket sales come down. 

“There’s a few things that we keep an eye on as we were putting our budget forecast together, and traditionally, one of those has been gas prices,” Strawn said. “A few years ago, $4 seemed to be the threshold when you see a significant impact on lottery revenues, and, more specifically, scratch tickets. Maybe you’re going in and you’re filling up the tank, you’re grabbing a slice of pizza, a fountain pop, and maybe a $5 scratch ticket. That type of purchase we saw was the one that was most affected when you see $4 a gallon and then they stop buying the ticket.” 

World Lottery Association 

Responsible gambling practices are a frequent part of the conversation at the Iowa Lottery. The organization has an extensive responsible gambling plan that falls in line with its overall goals of maintaining integrity, transparency and accountability. 

The organization recently received a Responsible Gaming Level 2 certification with the World Lottery Association.

“If we were in manufacturing, it would be considered an ISO-type standard,” Strawn said. 

Organizations certified by the World Lottery Association educate players and the public on responsible game play and offer resources when needed. The association sets benchmarks for state lotteries to meet, with the goal of improving responsible gaming practices globally.”

In 2023, the Iowa Lottery partnered with Scientific Games to establish a baseline for healthy play.

As it looks to the future, Strawn said the Iowa Lottery plans to build on its four decades of experience with continued growth in games, security and public support. 

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