"we regulate the passive exploitation of people to supplement taxes in a regressive manner."

I was convinced by this for a full 30 seconds before I realized there are millions of advertisements for the state lotteries. They aren't just regulating a market that will exist with or without the state, they are actively promoting and encouraging it

Can only speak for Pennsylvania, where I live, but before the lottery there were numbers games run by organized crime. At least with a state-run lottery they're a bit more honest about how you're getting screwed and they can tax the winnings.