Doesn't that mean that the lottery was losing money? How is that even possible?
That means that if the (global) prize becomes big enough, then for this day the lottery gives out more money that it cashed, but it's actually money they accumulated during the days there was no grand prize winner.
So in average the lottery doesn't lose money.
Lets say a lottery is set up to pay out 60% of money in over a year, but those payouts are done by 40% 9 weeks out of 10, and 240% the 10th week. If you only play the lottery on the 10th week, then your EV is +140%, even though the overall EV is still 60%.
From the article it was a version of this that happened.
The people rushing to buy tickets because of that jackpot have the same chances of winning as they would without MIT students buying tickets. They have a reduced amount of time to try and win it, since MIT winning will lower the jackpot, but they're probably better off for it by not throwing their money at the game as much.
The people really losing out are the ones who buy tickets no matter what the jackpot is, and that's only if they win after the jackpot has been lowered. They may have won more money, but if that was their concern, they shouldn't have been playing when the payout was so low.