From their web site and Dr.Googling, to answer your question they are selling logical equivalents of the respective lotteries, ie a bet on the lotto outcome not lotto tickets from the lotto sponsor.
They are quite open about it.
At the end of the day if you are a punter and pick the top numbers direct, or from Lottoland, does it matter if you have the same winnings in your pocket regardless of who/how it is paid? They pay out from their takings or when necessary from their insurances against large payouts (nb. large payouts have Very Low odds).
"We secure our policies with the world’s leading insurers and we are fully audited by KPMG. Lottoland completed an insurance-linked securities (ILS) transaction in Gibraltar, in order to insure itself against major customer wins. With a €100 million set aside that will be released by KPMG when major jackpots are won."