BROWSE

Jackpot

What is 'Jackpot'

A jackpot is the top prize in a game of chance; jackpots can be anything, including money, cars and houses. In terms of investing, a jackpot also occurs when an investor reaps a sudden windfall from a previous investment. Two commons ways an investor gets a jackpot is when a company's stock soars through an initial public offering (IPO) or when a stock price rises due to an undervaluation.

Explaining 'Jackpot'

Regardless of where the jackpot comes from, people who make money from sudden windfalls also pay a portion of the proceeds to the IRS. When winnings are high, as in the case of most jackpots, a taxpayer might have to pay the estimated tax liability throughout the year as quarterly payments. Sometimes the entity that awards the jackpot may withhold the taxes and send them to the IRS on the winner's behalf.

Largest American Lottery Jackpots

On Jan. 13, 2016, three winning tickets split the $1.586 billion Powerball lottery jackpot. This huge sum was the largest lottery jackpot on record in the United States. Each winner received slightly more than $500 million before taxes. The previous high was $656 million from a Mega Millions drawing on March 30, 2012.

IPO Jackpots

Investors who spend money propping up successful companies may earn jackpots once a business starts selling stock though public exchanges. Yahoo earned between $8.3 and $9.5 billion when Chinese e-commerce giant Alibaba had its IPO in September 2014. Alibaba raised $25 billion with its IPO, and Yahoo owned a 16% stake in the company at the time. The 140 million shares of Alibaba stock owned at the time of the IPO were worth $36 billion to $38 billion after the IPO.


Further Reading


Jackpot promotion model for Taiwan Lotto
www.tandfonline.com [PDF]
… 2006a. Application of grey situation decision making to Lotto's jackpot promotion evaluation … Applied Economics Letters, 13: 655–8. [Taylor & Francis Online], [Web of Science ®], [Google Scholar]; Mason, PM, Steagall, JW and Fabritius, MM … Public Finance Review, 25: 474–90 …

Hitting the jackpot and the health agenda: The case of processed potato productsHitting the jackpot and the health agenda: The case of processed potato products
www.sciencedirect.com [PDF]
… 2006a. Application of grey situation decision making to Lotto's jackpot promotion evaluation … Applied Economics Letters, 13: 655–8. [Taylor & Francis Online], [Web of Science ®], [Google Scholar]; Mason, PM, Steagall, JW and Fabritius, MM … Public Finance Review, 25: 474–90 …

Death and jackpot: Why do individual investors hold overpriced stocks?Death and jackpot: Why do individual investors hold overpriced stocks?
www.sciencedirect.com [PDF]
… 2006a. Application of grey situation decision making to Lotto's jackpot promotion evaluation … Applied Economics Letters, 13: 655–8. [Taylor & Francis Online], [Web of Science ®], [Google Scholar]; Mason, PM, Steagall, JW and Fabritius, MM … Public Finance Review, 25: 474–90 …

Jackpot? The impact of lottery scholarships on enrollment in TennesseeJackpot? The impact of lottery scholarships on enrollment in Tennessee
www.sciencedirect.com [PDF]
… 2006a. Application of grey situation decision making to Lotto's jackpot promotion evaluation … Applied Economics Letters, 13: 655–8. [Taylor & Francis Online], [Web of Science ®], [Google Scholar]; Mason, PM, Steagall, JW and Fabritius, MM … Public Finance Review, 25: 474–90 …

Hitting the jackpot: The influence of monetary payout on gambling behaviourHitting the jackpot: The influence of monetary payout on gambling behaviour
www.tandfonline.com [PDF]
… 2006a. Application of grey situation decision making to Lotto's jackpot promotion evaluation … Applied Economics Letters, 13: 655–8. [Taylor & Francis Online], [Web of Science ®], [Google Scholar]; Mason, PM, Steagall, JW and Fabritius, MM … Public Finance Review, 25: 474–90 …

The good, the bad and the unhappy: The cultural meanings of newspaper reporting on jackpot winnersThe good, the bad and the unhappy: The cultural meanings of newspaper reporting on jackpot winners
www.tandfonline.com [PDF]
… 2006a. Application of grey situation decision making to Lotto's jackpot promotion evaluation … Applied Economics Letters, 13: 655–8. [Taylor & Francis Online], [Web of Science ®], [Google Scholar]; Mason, PM, Steagall, JW and Fabritius, MM … Public Finance Review, 25: 474–90 …

Jacking up the jackpot: are lotto consumers fooled by annuity payments?Jacking up the jackpot: are lotto consumers fooled by annuity payments?
journals.sagepub.com [PDF]
… 2006a. Application of grey situation decision making to Lotto's jackpot promotion evaluation … Applied Economics Letters, 13: 655–8. [Taylor & Francis Online], [Web of Science ®], [Google Scholar]; Mason, PM, Steagall, JW and Fabritius, MM … Public Finance Review, 25: 474–90 …

The determinants of campaign spending: The role of the government jackpotThe determinants of campaign spending: The role of the government jackpot
onlinelibrary.wiley.com [PDF]
… 2006a. Application of grey situation decision making to Lotto's jackpot promotion evaluation … Applied Economics Letters, 13: 655–8. [Taylor & Francis Online], [Web of Science ®], [Google Scholar]; Mason, PM, Steagall, JW and Fabritius, MM … Public Finance Review, 25: 474–90 …



Q&A About Jackpot


What are two ways an investor can get a jackpot?

An investor may receive a sudden windfall from previous investments when stocks soar through IPOs or rise due to undervaluation.

What is a lottery?

A lottery is a form of gambling that involves the drawing of numbers at random for a prize.

How much do investors pay in taxes on their winnings?

The IRS requires taxpayers to pay estimated tax liability throughout the year as quarterly payments. Sometimes, entities that award the jackpots withhold taxes and send them to the IRS on winners' behalfs. In some cases, winners have to pay all taxes at once after receiving their winnings. However, most people who win large sums of money end up paying less than they would have if they had paid taxes throughout the year because they don't earn enough income during the rest of the year to require paying estimated taxes for those months. For example, someone who won $1 million might only have earned $5,000 during other months of that same year and therefore wouldn't owe any estimated tax for those months. If he didn't owe any estimated tax for those months before winning $1 million, he doesn't need to make any quarterly payments after winning either because his total earnings were below his standard deduction amount ($6,300). He would only need to make one payment at the end of the year when he files his income tax return with Form 1040 and Schedule SE (Form 1040). This is why it's important not to overpay your estimated taxes; you'll get your money back eventually if you've paid too much."

How do lotteries make money?

The organizers sell tickets and keep the money from ticket sales. They also get a percentage of the revenue if there is no winner.

What does it mean to say that lotteries are popular?

It means that people buy them often.

Are lotteries legal?

Lotteries are legal in some countries, but illegal in others.

What does a jackpot represent?

A jackpot represents the top prize in a game of chance.

How can you win a lottery?

You need to have all the correct numbers or be very close to having them all correct. This is called matching all or most of the numbers drawn by chance. If you match fewer than all, then you will not win anything unless your ticket has special features such as "instant wins" or "bonus draws". These features give smaller prizes to those who match only part of the winning numbers, but they do not increase your chances of winning any more than matching all would have done so on its own. In fact, because these extra matches are made independently from your main match(es), they actually reduce your overall chance of winning (see probability). For example, if you buy two different tickets with identical sets of six numbers each and one ticket wins $1 million while the other wins nothing, then both tickets technically matched three out of six numbers; however, since each set was chosen independently from one another (and thus had an equal chance to win regardless) this means that neither ticket should be expected to win anything at all (as opposed to one being twice as likely as the other). However, many modern lotteries offer lower-tier prizes up through several hundred thousand dollars before reaching the jackpot; thus players may still have something even