WHEN is a lottery ticket not a lottery ticket? When you’ve purchased it from Lottoland.

If you’re one of the 100,000-plus Australians who bought a ticket to the $A2.1 billion US Powerball jackpot last week — don’t freak out. You haven’t been scammed. You were most certainly in the running to win that big jackpot — it’s just that you didn’t have the kind of ticket you may have thought you had.

Lottoland is a European-owned company that lets you play lotteries from all around the world — lotteries Australians previously couldn’t access. It offers the US Powerball (prizes over $1 billion), the Euromillions (prizes of several hundred million dollars) as well as our local Lotto.

But instead of operating as a lottery agency, Lottoland is different. Instead, it operates more like a bookmaker, taking “bets” on the outcome of the numbers drawn. It is covered by an insurance policy, so if the jackpot is won, Lottoland collects an insurance payout — and in turn pays you.

Simple? Lottoland did not respond to multiple attempts to contact them, so I spoke to experts and did some digging.

I discovered Lottoland forwards players’ stakes to a company called EU Lotto.

EU Lotto is headquartered in the sunny European territory of Gibraltar, where companies pay no income tax on money earned from overseas.

In Australia, Lottoland is registered in the Northern Territory, which has come under fire for collecting a tiny share of tax on the huge sums wagered through gambling companies it registers.

Most lotteries are run by governments to pay for schools, roads and hospitals. Lottoland is different — a private company run for profit.

Australia’s anti-gambling senator Nick Xenophon blames the laws in the Northern Territory.

“Lottoland has turned into a legal no man’s land and we need to close the loophole,” he says. “It’s also causing a haemorrhaging of local lotteries including state-owned ones. We will miss out on money for hospitals and schools because it will bleed government revenue.”

Lotteries are not the most harmful kind of gambling, experts say. Pokies — where the people who can least afford it throw their life savings away by spinning the wheel every few seconds — are the worst. Because they only happen a few times a week, lotteries are a lot less addictive.

But Lottoland is making lotteries more frequent.

“If you’ve got a product that allows you to bet on a lottery ticket three times a day your chances of getting into a problem with that become much more intense,” gambling researcher Dr Charles Livingstone said.

On the Lottoland site, you can play three lotteries in the next 18 hours — Tuesday Lotto, Multi Keno and German Keno.

Three times in the next 18 hours is far less often than is possible at a Casino or on a sports betting site, but Professor Livingstone laments the proliferation.

“God help us. Every time you turn around there’s a new gambling product. At what point do we say enough is enough?” he said.

Lottoland seems safe for players. It has paid out to winners so far.

Still, Tatts has begged Aussies not to migrate to Lottoland.

“The best advice to Australian lottery customers is to buy local lottery product at face value, directly from the licensed operator with known integrity, and with the guarantee that any prizes won will be paid,” a Tatts spokesperson said.

It is tempting to ask the government to ban every new gambling type that pops up. But economics professor Sinclair Davidson says the government should be careful not to over-regulate.

“The social costs of excessive regulation can be very high,” he said, proposing a limited set of laws to avoid criminality and help problem gamblers.

Entering a lottery at all is a bad idea from a financial perspective. We can’t expect to profit because the odds are so bad. The only sensible reason to enter is the excitement of thinking about winning.

And in some lotteries the odds are even worse than they seem.

Senator Xenophon says the Northern Territory should give up its powers to regulate gambling companies.

“An increasing number of Australians are being hurt because of their weak regulations,” he said.

Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine.

Follow Jason on Twitter @Jasemurphy