Premium Bonds – Combining Bond Investing with a Lottery

An interesting investment that I first heard about just a couple of months ago is buying a Premium Bond.  You can buy Premium Bonds in the United Kingdom. Instead of paying interest, Premium Bonds are entered into monthly prize draws.  You receive a unique Bond number for every £1 you invest. So if you invest £100 you get 100 unique Bond numbers and 100 chances to win every month. As well as the £1 million jackpot, there are over a million other prizes from £25 to £100,000 every month.  Prizes are exempt from UK Income Tax and Capital Gains Tax.  You can cash in your Premium Bond for the original price you bought them.

To me, Premium Bonds seem to be a combination of a bond and a lottery ticket. They are apparently very popular in the United Kingdom with a third of the population owning Premium Bonds. I wonder if these types of bonds would be popular in the U.S.  What do you think?