Buffett first approached Yahoo with billion-dollar bracket

The prize — $50 million bigger than the largest-ever lotto payout — will go to the entrant who correctly predicts every winner in the National Collegiate Athletic Association’s men’s basketball tournament. Buffett’s Berkshire Hathaway (BRKA) is insuring the billion-dollar contest, which will be put on by Detroit’s Quicken Loans.

As Fortunefirst reported earlier this month, Buffett tentatively approached Quicken Loans founder Dan Gilbert with the idea for a billion-dollar bracket in late November. At the time, Buffett estimated the odds were slimmer than one in 100 million that someone would win the grand prize. However, he says that because basketball victories are not random, there are no “true odds,” and the likelihood of someone winning could be as high as one in 20 million.

There is no recorded example of anyone ever creating a perfect bracket. But Buffett, who had talked to Yahoo (YHOO) about offering the prize before partnering with Quicken Loans, says that if there is big participation, he could be on the hook for a payout. “If there’s only one submission you’re probably going to win,” he told a handful of Quicken Loans execs in November. “And if there’s a trillion, you’re going to lose.”

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That’s probably why Quicken Loans is capping participation at 10 million entrants, though it said in a statement it reserves the right to “expand the entry pool.” Here are the rules: One entry allowed per household. Registration is free and starts March 3. The prize money will be paid out in 40 annual installments of $25 million, or in one lump sum of $500 million. Even if no one hits the jackpot, the top 20 winners will get $100,000 each.

The odds of being even one of the top 20 aren’t great, and, of course, it’s not likely anyone will walk away with the billion-dollar prize. “On the other hand it can be done,” Buffett says. And hey, it’s cheaper than a lotto ticket.