It says that the state made money on this, too... though I don't quite understand how. Clearly someone had to lose money.
If I understand the matter correctly, the "someone" who loses money is the same someone who always loses money when buying lottery tickets - the buyer. The construction of the roll down system just makes it so that some of the money lost by players from the (majority of) rounds during which the jackpot is built towards the cap, is redistributed towards the round where the roll down happens. So much so, that this roll down round actually has an expected gain for each ticket. The players clever enough to only buy tickets in the round in which the the roll down is expected to happen thus profit from those who buy tickets in all the other rounds. The state, however, takes its 40 % profit from everyone.
Right. The state still loses money when this roll-down happens, but this seems to have been intended as marketing, which makes measuring its total impact harder.
"In 2005, Dr. Zhang was having an ongoing discussion with friends about the Lottery, with Dr. Zhang taking the view that it offered poor odds and was a tax mainly on poor people. To bolster his argument, he began analyzing the Massachusetts Lottery’s various games. But when he got to Cash WinFall, he was shocked to find that during roll-down drawings the odds were in the bettor’s favor."
Full story here - it's rather engrossing.
http://www.mass.gov/ig/publications/reports-and-recommendations/2012/lottery-cash-winfall-letter-july-2012.pdf