California does not tax lottery winnings from the state of California. Therefore, they also do not allow deductions for losses on the California lottery. If you did not play the lottery and got your gambling winnings from other games, then you can leave the adjustment at 0.
Let's take some examples. You win 20 in the California lottery and spent 15 doing it. You also went to the casino and won 15 and lost 5. Your federal winnings would be 35 and losses would be 20. Your California winnings would be 15 and 5. You would have to adjust the winnings by 20 and the losses by -15, which is the greater of -20 federal losses, or -15 which is your California lottery losses.
If you win big at the casino and win 50 and don't lose anything but you spend 70 on California lottery tickets without winning anything, it would net out on your federal return. On your California return, you aren't allowed to take the deduction for lottery losses, so it would have to be adjusted by -50 which is the greater of -50 losses claimed federally or -70 actual California lottery losses. Your California winnings would be 50 with no losses to offset it.
I agree that the wording leaves a little to be desired.
