The first lottery in England of which any record survives was in 1567, but lotteries had been well established on the continent, and especially in the Low Countries, for over a century before that date, and it seems likely that undocumented lotteries had already been held in England. It was not until 1567 that the state became involved in such a scheme in England
The Royal Lottery of 1567-68 had as its purpose the provision of finance for the improvement of harbours and for other public works, but was not a success, and although it appears to have been followed by other state ventures of the same kind, through the following 125 years lotteries were mostly undertaken under licence or patent by private projectors, organised for specific purposes by private adventurers with royal protection.
In 1694 the first state lottery (known as the 'Million Lottery') was instituted, and formed the pattern on which a further 42 such lotteries up to 1768 were held. Managers, or Directors, were appointed by letters patent to produce books of numbered tickets, mostly costing £10, but in some lotteries costing 1 guinea, £3, £5 or £100, which were delivered to Treasury appointed Receivers. These Receivers sold tickets, delivering one part to the buyer, and returning the rest, signed by the buyer, to the Managers with an account for the money received. The Managers detached a second part of the ticket, rolled it up and locked it in a box while the third part remained as a counterfoil. In a second box was locked another set of tickets, numbering the same as those in the first box, which were previously divided into blanks and prizes. The draw was carried out by drawing tickets successively from the first and second boxes and pairing them off, holders of tickets from the first box drawn immediately before a prize or 'fortunate' ticket from the second box being allotted the appropriate prize. In the £10 and £100 ticket lotteries, all purchasers were guaranteed some return, either as a prize or as an annuity, although not the full return of their original stake. Fortunate ticket holders received annuities or prizes in addition. In the lotteries for which tickets cost less than £10, purchasers were not guaranteed any return, and only fortunate ticket holders won annuities. The Managers printed lists of the winning ticket numbers and the holders' names, and transferred the original lists to the Exchequer. The holders exchanged their own ticket for orders for payment on the Bank of England. This first lottery in 1694, for which 100,000 £10 tickets were offered, led to the establishment by its subscribers of the Million Bank.
In 1699 a statute suppressed lotteries, and the statute establishing the next state lottery in 1710 reinforced this prohibition. Other statutes subsequently suppressed differing activities connected with lotteries until the Gaming Act passed in 1739 consolidating this legislation. A few private lotteries were permitted by Act of Parliament during this period, but following the Gaming Act no private lottery was held, authorized by statute, until 1774. From this date acts were passed again with increasing frequency to permit private lotteries whose drawing was often combined with that of the state lotteries. The Lottery Office exercised control over private as it did over state lotteries.
Two lotteries in 1711 and 1712, known as the first and second Classis Lotteries, were drawn by a slightly different method to the 1694 'Million Lottery'. There were no blanks in the second series of tickets, which were divided into five classes, each marked with a wide range of prizes, and each put into a separate locked box. At the draw the second ticket of each pair was drawn in rotation from the five boxes and prizes allotted accordingly.
The 'Million Lottery' and the many succeeding state lotteries, which were an important feature of public finance during the following century, were generally combined with annuities as prizes, or entry was made conditional upon the purchase of annuities. From 1769, although annuities were not entirely abandoned, prize draws became more normal. From 1769 to 1826, when they were abandoned, 126 state lotteries were held, but were mostly simple win or lose gambles.
The main system of drawing remained, with some variations in detail. From the first, brokers sold shares in tickets for state lotteries, to enable those who could not afford the price of a whole ticket to participate. The early state lotteries were undertaken by Treasury-appointed managers, directors and receivers who conducted their business through Transfer or Lottery Offices established for the purpose of the lottery in question. The abuses and frauds which ensued led to a requirement that all those who opened offices for dealing in tickets should be licensed. During the course of the eighteenth century a nucleus of lottery officials emerged to form the permanent core of a central office for the management of state lotteries. Following the Lottery Office Keepers' Act 1779 their work was complemented by the Board of Stamps which was given responsibility for licensing offices for the sale of tickets, the authentication of tickets when divided into shares and the detection of fraudulent dealings. All tickets which were divided into shares had to be deposited at the Board of Stamps for authentification by stamping and it was made illegal to sell shares in unstamped tickets. In spite of these efforts to combat abuses the lottery system fell into increasing disrepute due to numerous malpractices including the existence of illegal insurance or wagering on results.
The nineteenth century saw no diminution in public disquiet and in 1826 state lotteries came to an end. In 1831 the Lottery Office was abolished and its residual work, principally in relation to unclaimed prizes, transferred to the Board of Stamps, later the Board of Stamps and Taxes.