Taxes. Lottery winnings may be taxed depending on state taxes. Though it is not clear if this is a lottery or gambling. Gambling winnings are not normally taxed in the US.
Where did you hear this? They're income, and subject to the income tax.
If you earn $50,000 in income, $X in winnings, and $Y in losses, you pay taxes on $50,000 of income, plus taxes on $X-Y of winnings (if it's a positive number).