The Danger of Border Crossing to Play US Lotteries

The Powerball lottery drawing on January 13, 2016, was described as “the biggest jackpot in the history of the world” and it indeed set a record that will be hard to beat. The jackpot prize had an annuity value of $1,586,400,000 (over C$2 billion) and was eventually claimed by three Powerball tickets sold in California, Florida, and Tennessee.

As the multi-state jackpot grew steadily in the weeks ahead of the drawing, Canadian residents surged across the border to buy Powerball tickets in the United States. “The Canadians — they’re coming like crazy here for the lotto,” an official of the California State Lottery told CBS News. “You don’t have to be a U.S. citizen to buy a Powerball ticket, as long as you’re buying your tickets at an authorized retail location, then that’s fine with us.”

A clerk at a grocery store in Blaine, Washington, about a mile from the U.S.-Canadian border, said that 60 per cent of his customers buying tickets were from Canada, while a cashier in another town some 45 minutes south of Vancouver estimated that 95 per cent of its lotto ticket buyers were Canadian.

In order to win the Powerball jackpot, players must match five main numbers selected from 1-69 and a single Powerball additional number from a guess range of 1-26. The odds of winning a Powerball jackpot are one in more than 292 million, compared to a 1 in nearly 14 million chance to win in the Canadian Lotto 6/49 lottery.

It is legal for tourists and non-US residents to play the Powerball lottery. The official Powerball website clearly states, “You do not have to be a citizen or a resident to play the game. You can be a tourist.” Tickets must be bought in person at an authorized retailer in the United States or you can buy Powerball tickets online on theLotter.

Canadians who play the Powerball lottery should know in advance their tax obligations if they win. They will have to pay 30 per cent of their winnings in federal U.S. taxes and some states also collect tax on lottery winnings (for example, New York charges a tax of 8.82%). On the other hand, Canadians don’t have to pay tax on their U.S. lottery winnings in Canada, as lottery winnings are exempt from taxation under section 40(2)(f) of the Income Tax Act of Canada.

There is, however, a little known American law which could make it potentially illegal for Canadians to collect their Powerball winnings. According to the Immoral Articles law, “all persons are prohibited from importing into the United States from any foreign country any … lottery ticket, or any printed paper that may be used as a lottery ticket, or any advertisement of any lottery.”

Essentially this means that if you purchase a lottery ticket in the United States and it wins, it is illegal for you to cross the border to collect your winnings. In December 2015, U.S. border guards actually seized nine B.C. lottery tickets from a man crossing the border into the United States, although the seizure was not enforced and the tickets were returned to their owner.

There are ways for Canadians to legally get around this little-known U.S. law, including leaving their Powerball tickets in a safety deposit box in the United States, or with a trustworthy American friend. And despite the law, State of Washington lottery officials sent a reassuring message to Canadians during the billion-dollar Powerball jackpot frenzy stating they would help winners collect their prize money.