Corellium is heavily used by security researchers, killing it will reduce the number of bugs that are found in iOS and make the platform less secure overall.
Apple wants to project the appearance they have minimal security flaws and they accomplish this largely by making security research more difficult to perform.
I'm also confused why you seem to think security researchers don't deserve to get paid for their work. Bug bounties have been around for a while now for a reason.
This move by Apple seems to contradict the notion that Apple is serious about security - how are researchers supposed to find bugs without this?(a successful lawsuit would also set precedent that no US entity could run a very similar service)
Sure, there's workarounds (eg buy a pile of iPhones), but why is Apple making it harder to secure their product?
Which is why the $1m announcement was an odd move and done people on HN consider it just a PR thing.
Apple is depending on privacy and security to be a key differentiator with other phones, tablets and computers. Especially as the markets for all three are slowing as new features are harder to invent.
This company undermines this by allowing anyone to find bugs whilst encouraging them to profit off it instead of working with Apple.