I didn't look up any stats on the Texas lottery, but likely there are public details to analyze the following.
It is quite possible that these guys not only did not defraud Texas, but even "made" the State some money, in a relative sense.
Remember, the lottery works by lots of people buying tickets and losing. The money accumulates. Eventually, someone wins, but the money won is just a percentage of all money accumulated. As quoted : "[Then Texas announced no winner in an earlier lottery, rolling its jackpot into another drawing three days later.]"
The $95M they made was a percentage of something bigger. Instead of the total fund being funded by millions of individual citizens paying $1 (or whatever the ticket price is), it was funded by 1 entity buying 1M tickets (or whatever the exact number). Either way, 1M tickets-dollars were transacted. If done legally, it is all the same to the lottery and its bank account. Whatever they put in, it was a small percentage of what everyone else added, and that is where their winnings came from.
The money they won was already there in part, from reserves from earlier play cycles. The money they put in likewise feeds the kitty for next cycles. Even if they did not play, other people are putting money in. Regardless who is putting their money in, as they do, the coffers swell, and if one entity puts in "way more", the coffers swell by that much more. If they bought "1 million" tickets, and it was 1 million more than would have been bought by the public, then the lottery, which keeps a percentage, made more than if those guys hadn't played.
They got a lot, but the state also got more than had they not played. The only true hurt is that other players were unfairly disadvantaged. But even on that point, they did not steal the game, and it was still possible that another player or players could have won it all or split it with them.
That is probably why they have done so for a long time and stayed under the radar, because it is unsavory but not illegal, and the lotteries are still making good money - or possibly even more money.
The problem is not that they stole anything - they played square, if not so fair. And that is the heart of the issue it seems to me.
1 - The state got hoodwinked, bamboozled, egg-on-face, pants-down, call it what you will, and nobody wants that embarrassment.
2 - There is a bit of of "gee whiz, I wish I thought of that, lucky sob's."
3 - It is genuinely unfair to the playing public who expects a fair chance at winning.
The just need to change the rules to limit how many tickets one can buy, and a system to catch violations.