NC Audit Finds Lottery Sales Rose to $6.6 Billion in FY2025 While Education Transfers Held Near $1.08 Billion

The Sales Went Up. The Money Stayed Flat.

North Carolina's lottery took in $6.6 billion in gross sales in fiscal year 2025, up from $4.3 billion two years earlier — a jump of about 51%^[3][6]. If you stopped there, it would sound like great news for the schools the lottery is supposed to fund. It isn't quite that simple.

The share of that money going to the Education Lottery Fund fell hard over the same two years, from 23% to 20% to 16%^[1][4]. But the actual dollars barely moved: $1.02 billion in fiscal 2023, $1.09 billion in 2024, and $1.08 billion in 2025^[6]. Sales grew by $2.3 billion. Schools got roughly $60 million more than they had two years before^[6].

That gap between the two numbers — sales soaring, schools getting a rounding error's worth of extra money — is the whole story. State Auditor Dave Boliek released a performance audit on Tuesday, September 8, 2026, laying out exactly how that happened^[1][7]. He didn't accuse anyone of breaking the law or mishandling funds. He asked a much harder question: what is the lottery actually supposed to maximize?

Why a $20 Bet Can Count as $100 in "Sales"

The audit points to one product: digital instant games, online scratch-off-style tickets the lottery commission approved in August 2023 and launched that November 15^[9][10]. They sold zero dollars in fiscal 2023. Two years later they brought in about $2.60 billion, roughly 40% of everything the lottery sold^[3][6].

Here's the mechanism that explains almost everything else in this story. Digital instants are designed to pay back about 87% of what players bet, as prizes^[3][6]. A player who deposits $20 and wins can replay those winnings, win again, and replay again. Every one of those replays counts as a new "sale," even though the player never put in more than their original $20.

That means a game with a high payout rate can generate huge sales figures without generating much profit — because most of the money keeps getting handed back to players and re-wagered. Traditional paper scratch-offs pay out far less, so more of every dollar spent on them stays with the state^[3][6]. When digital instants become a bigger share of total sales, the share of sales that turns into money for schools mechanically shrinks, even if the lottery is running exactly as designed.

State law says the lottery should send at least 38% of its revenue to schools. But the audit is explicit that this is a guideline the lottery must meet "to the extent practicable," not a hard requirement^[2][7]. That legal detail matters, because it's the difference between "the lottery may be violating the law" and "the lottery is following a law that no longer describes what's happening."

"Probably Not What You Think It Is"

Boliek's office frames this as a matter of honesty with voters. His office's line, quoted widely: the Education Lottery is "probably not what you think it is"^[2]. The argument isn't that anyone broke a rule. It's that a state agency has quietly shifted its business toward online, slot-machine-style games, and lawmakers have never gone back to ask whether that still matches what the lottery is for^[2][7].

Lottery Executive Director Mark Michalko's written response makes the opposite case. Maximizing total dollars for schools and holding a fixed percentage aren't both achievable at the same time, he argued^[3][7]. To hit 38%, the lottery would need to sell fewer high-payout games — the games players are choosing in growing numbers — and the actual dollar total handed to schools would likely fall, not rise^[3][7]. He said the lottery works hard to maximize the real number that matters: total dollars returned for education^[3][7].

Both readings of the same numbers are defensible, because they're measuring different things. Boliek is measuring the promise embedded in a percentage. Michalko is measuring the outcome embedded in a dollar figure. The audit doesn't pick a winner. It asks the General Assembly to decide which one the lottery should be chasing^[1][3][7].

The Groups Who Warned About This in 2023

The digital instants fight isn't new. When the lottery commission approved the games in August 2023, an unusually broad coalition tried to stop it: then-Attorney General Josh Stein, police chiefs, the conservative NC Family Policy Council, the progressive NC Justice Center, the free-market John Locke Foundation, retail and fuel-marketer trade groups, and 32 members of the NC House Democratic Caucus^[11]. That's a left-right alliance that rarely agrees on anything else.

Their objections split into two different concerns. Anti-gambling and consumer groups argued that fast-replay online games resemble the video sweepstakes machines still illegal to operate in North Carolina, and that this style of play raises rates of problem gambling, with all the downstream harm that research ties to it^[11]. Retail and convenience-store groups had a narrower, commercial complaint: online play siphons customers away from the in-store ticket sales their members' commissions depend on^[11].

For that coalition, the audit's 16% figure isn't a funding-formula puzzle. It's a state-generated number confirming the warning they gave three years ago^[1][11]. Worth noting: the audit itself makes no findings at all about problem gambling rates. It's a financial audit, and this argument sits alongside it rather than inside it^[1][7].

Why Nobody in Raleigh Wants to Touch This Fast

Underneath the dollars-versus-percentage argument sits a set of pressures pulling everyone toward inaction. Lottery money over $1 billion a year is revenue lawmakers never had to pass a tax to get^[6]. Any fix that shrinks the dollar total creates a budget hole someone would have to fill another way — which is the quiet reason a hard percentage floor is a harder sell than it sounds^[1][7].

There's also outside competition to consider. Mobile sports betting became legal in North Carolina on March 11, 2024, giving private operators a foothold on the same phones the lottery is trying to keep people playing on^[8]. A lottery stuck selling only low-payout paper tickets would likely lose players to those apps, which is part of why digital instants were built in the first place^[6][8].

Coverage of the audit split along fairly predictable lines. Conservative outlets like Carolina Journal and The Center Square led with Boliek's sharpest quote and gave little space to the payout-rate explanation^[2][3]. Left-leaning NC Newsline and public broadcaster WFAE centered the shrinking school share, with WFAE's "share," not "money," framing among the more careful of the six outlets reviewed^[1][5]. Business North Carolina read it as a product-mix story and left the 2023 gambling objections out entirely^[6][11]. WRAL's center framing stuck closest to what the audit actually says^[4].

None of that resolves the actual question the audit raises. The lottery has committed to reviewing the findings with its commission and meeting with General Assembly leaders about possible changes to the law^[7]. Until lawmakers decide whether the lottery's job is to maximize total dollars, hit a fixed percentage, or balance both, the number that moves — and the one that doesn't — will keep pointing in opposite directions.