The annuity is based on the interest rate if the cash value is invested in ultra-safe bonds, usually 30 years US Treasuries. With interest rates this low I would think it a poor long term investment since the annuity does not adjust for possibly higher inflation and historically stocks are a much better investment over the long term.
The big argument in favor of the annuity is that it is essentially stupid insurance. It allows the winner to do some dumb things and make mistakes, maybe taking investment advice from uncle Roy, or letting your dead beat cousins mooch off you for a few years until you get tired of it, and still know that that you are not gonna be broke. A 2015 study by the Harvard business School showed that about 40% of lottery winners burn through their winnings in the first 5 years. Most people who play the lottery, and therefor most who win, come from backgrounds that leave them intellectually and temperamentally ill-equipped to deal with sudden wealth. For them, the annuity is almost always going to be the best choice, though it is rarely taken.
Off to buy a ticket now!
I ne’er stand the stupid theory. But damn, that would be all star stupid. That would require a spending spree that would be difficult to keep up.