Well, not quite -- if odds of winning are in fact around 1 in 200MM or less, there is no market failure here. Their point would still stand if they sold 100MM

Well, not quite -- if odds of winning are in fact around 1 in 200MM or less, there is no market failure here. Their point would still stand if they sold 100MM tickets though, so as not to confuse the two issues (ie. the notional amount and the expected value), perhaps it would have been a better example that way.