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Government should get out of gambling; sponsoring and prohibiting. Both are cases of government doing more than it should.
Lotteries may provide income, but I don't think states should run them any more than states should engage in any for-profit enterprise. That's not the purpose of government.
However, I don't think the states have sufficient cause to continue the prohibition of gambling. While some might argue that gambling harms people with gambling problems, black markets exist. Forcing the people with problems into the black market is likely to increase, not decrease, the harm. Meanwhile, the reduction of personal and economic liberty is undeniable.
Allowing casino gambling may not solve states' economic woes, but prohibition isn't solving anything either. If we err, it should be on the side of liberty.
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