I am not against legalised gambling here. I gamble myself on the horses sometimes, and have no problem with there being betting shops. Gambling in moderation can be a lot of fun.
But I do have a problem with the state being involved with it for the following reasons:-
1) A philosophical one: government should not be involved in encouraging fatalism and gambling. Investment, risk, creativity... absolutely, but the lottery is a pure gamble. Nothing gets created as the result of it, and it encourages desperate people to only hope on their lucky numbers, rather than working on their skills.
2) The distribution of wealth. The lottery is terrible for encouraging wealth away from the desperate and poor towards the statist middle classes. The Arts Councils are getting opera and ballet produced using the contributions of many of the poorest in our society.
3) A bad bet. The lottery is a worse bet than other forms of gambling such as premium bonds, fruit machines or sports betting.
If the lottery is there to help the poor with projects, yet takes money from the poor to give back to them, then it's not really doing any good, and all that it actually does it to produce more government to deal with the funnelling of money.
As I said, I basically believe in liberty and have no problem with legalised gambling. I just don't think it's something that government should be doing.