The state still collected their taxes, so it still feels within the spirit of the game.
I don't think it's a problem for the lotto to not exist.
As for the underlying problem, if they're worried about this being a long-term issue for the viability of their tax, then they should change the odds to make it non-viable to buy all tickets.
There's nothing against the spirit of a gambling game that is poorly setup, unless it's explicitly made illegal.