State Audit Shows Increase In Machine Gaming
This week, a new audit from the North Carolina Office of State Auditor shows an increase in lottery sales and a decrease in the percentage of proceeds transferred to the State’s Education Lottery Found. Between FY 2023 and FY 2025, the North Carolina Education Lottery (NCEL) reported a gross sale increase from $4.3 billion up to $6.6 billion, up 51% in two years. Over that same period, the percentage of sales transferred to the Education Fund fell from 23% to 16%. Actual dollars transferred to the Education Fund increased from $1.02 billion in FY 2023 to $1.09 billion in FY 2024 but dipped to $1.08 billion in FY 2025.
“Last December, the State Auditor’s Office released a financial audit of the Education Lottery, and we were left with questions on the amount of money going toward our public schools. With the release of this performance audit, we found that gambling trends have dramatically shifted. New online slot machine gaming, which has an 87% payout rate, now dominates the market,” said State Auditor Dave Boliek. “Online slot machine gaming grew from generating 0% of the Education Lottery’s revenue to 40% in just three years. The Education Lottery today isn’t what it used to be, prompting auditors to recommend the primary policy objective of the lottery be revisited.”
The online lottery option is designed with prize payout rates of approximately 87%. Since launching, the games have gone from generating $0 in sales in FY 2023 to $2.6 billion in FY 2025. Conversely, scratch-off and draw game revenues fell from approximately $4.3 billion in FY 2023 to just under $4 billion in FY 2025. The higher payout rate from the online slot machine games leaves fewer cents of each sales dollar available for transfer to the Education Fund. Similar gambling trends have been seen across state lines in Kentucky and Virginia, where lottery sales have grown significantly following the introduction of online games.
Other facts from the audit include:
A total of $12.3 billion has been distributed to education programs from the NCEL's inception through FY 2025.
The NCEL spent $54 million on advertising and marketing in FY 2025.
The NCEL spent $125 million on its three main vendors for gaming system services in FY 2025.
Total vendor expenses reached $207 million in FY 2025.
The retailer with the highest number of lottery sales was in Brunswick County.
