Scratch cards are lottery tickets with a coating that the buyer scratches off, to see at once whether the ticket has won. Lotteries call them instant tickets or instant games. They are printed by the millions. Each one is checked against the lottery's central system when a prize is paid.
A scratch card does not decide its result when it is bought or when it is scratched. Every result is fixed when the cards are printed. First, the lottery designs the game. It decides the price, the number of cards, and how many prizes of each size there will be. Then software spreads the winning and losing results across the whole print run in a random order, so that no one can tell which cards will win.
Consider a $5 scratch card game of the state lottery of Texas, in America. The lottery prints 10 million cards, which will bring in $50 million if all of them are sold. It sets aside 65% of that money, or $32.5 million, for prizes. About one card in four wins something. Most wins are small, such as $5 or $10. Only a handful of cards win the top prize. The remaining 35% pays the shops' commission and the cost of printing, and the rest goes to the state's programmes.
Each card carries two codes. A barcode is printed on the back. A secret validation number is hidden under the coating. The lottery system keeps a record of the result of every card. The cards travel to shops in packs. A pack cannot pay any prize until the shop has activated it in the central system. So a pack that is stolen on the way to the shop is worthless.
When a buyer brings a winning card to a shop, the terminal scans its codes. The central system confirms four things: that the card is genuine, that its pack was activated, that it has won, and that it has not been paid before. A small prize is paid at the shop. A large prize is paid at the lottery's office.
The 65% set aside for prizes plays the same role as the payback on a slot machine. The 35% that the lottery keeps is its form of the house edge. The random order fixed at printing replaces the random number generator that decides each spin of a slot machine. Scratch cards are also sold as online instant-win games in some countries. Regulators watch how often and how much people buy, under responsible gambling.