In these cases, yes. Of course there's also the more direct saying that lotteries are a tax on stupid people. But I don't see it that way. It's supposed to be a contract between a lot of poor people allowing one or more of them a chance at a "rich" life. If anything, it's a tax on desperate people.
Yes, (a (non-broken) lottery might be a rational choice even for someone understanding the math behind it.
If you only have $20k and need $0.5M for an urgent life saving operation, then the expected payoff for not playing is -$20k (death) and it's -$20k+(some non-negative value representing the win) for spending all of your money on tickets.
It doesn't even need to be that desperate. I understand the math, and I play the lottery every once in a while for the same reason that perfectly rational people visit casinos: it's fun and carries a non-zero chance of a payoff that is more life-changing than the money I spend on it. Being stupid is not a requirement.
We spend our money on plenty of things that offer negative monetary returns in exchange for pleasure, comfort, and entertainment. Premium beer, in my case.
Besides, it's not constructive to consider only the straight monetary expectations of lotteries when discussing their socioeconomic implications. Poor people are generally not buying tickets because they think it's the mathematically correct move.
Yes, it can be better than doing nothing, but it's a rational choice only if there isn't anything else you can do that offers a better chance of multiplying your money by 25.
Consider a lottery that sells tickets for $1 and pays back an average of 50c per ticket, with only one prize: the $500k jackpot. (This is pretty much the most favourable case for trying to raise the money by lottery.) Then each ticket has a 1/1000000 probability of winning, and (roughly) if you buy $20k of tickets then you have a 1/50 chance of winning.
Instead, you could go to a casino and bet all your money on one spin of the roulette wheel. Assuming that the game is fair but has single and double zeroes, your chance of winning is 1/38 (instead of 1/50) and if you win you get $720k (instead of $500k).
Or you could sink a lot of money into a troubled company whose stock price is very low and hope it recovers dramatically. I don't know how often such opportunities exist that have even a 1/50 chance of paying off 25x in a hurry, but I doubt it's that rare.
Looked more into Cash WinFall, looks like they are trying to fix the lottery and are blocking gamblers from buying more than $5000 of tickets per day per terminal:
http://www.masslottery.com/about/news.html
The article from the old discussion mentioned that lottery merchants were violating a number of rules by letting these high-rolling customers run the ticket machines, etc. I wonder how they'll enforce this new rule if they had trouble enforcing the rest of them.
So Srivastava could determine a winning-vs-losing ticket by looking at it. What lottery out there lets you examine and play with tickets before purchasing them? Are you allowed to return an unscratched ticket for a refund?
The articles linked to in the OP (both of which have been discussed on HN before) provide a lot more detail.
To answer your specific question, Srivastava called the provincial lottery agency (iirc - it was Canadian) and asked 1) Would they send him a large number of tickets to use for a promotion / fundraiser, and 2) Would they "buy back" at face value any unused tickets. They said they would gladly do both - meaning he could examine before scratching, return unscratched, and also avoid lining up at the drug store to buy 10,000 tic-tac-toe tickets at once!
And it wasn't suspicious when the lottery got back a large number of unsold tickets broken off the reel?
I give Srivastava credit for finding and exploiting the loophole, but they also seem to be easily closable. So the scratchoff is vulnerable. Future ones might be as well. A little common sense and better security could avoid another mishap.
No, that's exactly what lead to these situations. If you choose the winning tickets first, the player may have access to observed numbers of winners or your potential filler algorithm. That information must be accounted for by the design.