I can't holler at the Swoopo folks about it, since I don't know them. But, you're right here, so I feel compelled to be judgmental. I don't do that very often. Generally speaking, I think just about anything goes (porn, gambling, soft drugs like pot, etc., as long as you're only selling to adults). But taking advantage of the least intelligent and the most desperate to save money is just nasty.
The smartest man I have ever known, who will one day cure cancer, once described to me in all earnestness how the double-your-bet-after-you-lose strategy was flawless. (Relatedly: He also was a fan of penny stocks.)
But you just said you're OK with gambling, so I don't get the outrage. Swoopo pushes it as "entertainment shopping", which I think is fair.
And if you want to really get cynical, separting the idiotic from their money is a public service insofar as they can't spend it on things with negative externalities, like US Weekly</joke>.
I'm OK with honest gambling...payouts of 85% to 95%, as found in Las Vegas. I'm not OK with lotteries (which are legal, and in fact operated by the government, but I consider them unethical for the same reason...they prey on those least able to understand the odds and the costs, and those who most desperately need money). At least in the case of lotteries it contributes to some sort of common good (states usually say it is for schools; "think of the children!"). Swoopo is contributing to nothing but filling the pockets of the founders.
Also, what actually made me start building it was that I would have a twist where losers would be given the chance to still buy the product at a discount (ensuring a profit margin by taking into account revenue from bids and % of people who usually would take the 'consolation' offer).