The state takes their money off the top, and the rest goes towards the jackpot. They make money as long as people play the game. They might have made more money by hyping the higher jackpot to get more ticket sales, but it obviously wasn't worth their time.
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.
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.