I actually am wholly opposed to government-run lotteries, mainly for the reasons you cited but also because they prey upon the poor and act as a wealth redistribution engine from the poor to the rich.
My question is why would taking advantage of this system for one's own gain be unethical? The administrators believe (apparently erroneously) that they have a built-in statistical advantage over anybody playing. So by the logic that the MIT students shouldn't exploit a flaw in the system even though it is legal because it is unethical, then the lottery administrators should not be able to run a lottery for the same reason.
