...because it would require someone to do
a, a whole lot of drop catching, reg'ing or
b, providing existing domain names
which leaves the following questions:
in a domain landscape where most are out to resell or develop to make a decent profit, how would your system assure the one that provides a domain to come out with a profit. And even if you could show ROI, how can you assure that the return is equal or higher than the value of the domain?
who would provide the domains?
How can you assure that domains are indeed transfered to the winner of your lottery, etc.
these are just a few questions that came to mind immediately. If i start thinking about it, i'd start with financial questions, model of play and participation, etc.
i'm not saying that this is impossible, but i'm sure it's going to be an interesting project to see succeed.