Hidden MMR is used to rigg towards 50/50 matches. This works against SR, because forcing at the (local, match-based) level necessarily voids the natural integrity at the (global, ladder-based) level.
So before we talk ethics, the structure itself is just broken and wrong. You don’t get a working ladder if you’re intervening on natural match formation. Interpretable or not. There is no free lunch.
In a fairplay (i.e. correct) ladder, matches need to be formed using the same metric as the payout. Anything else is dishonest and inhumane.
As far as ethics go: hidden MMR is so egregiously deceiving, it should be mentioned right on the box before you buy the game “Warning: Contents Rigged and Skill Hidden”. And this should be done by an official source with authoritative capacity. Gamers need to know what their product actually is. Rigged, with fake skill labels.
The criteria people are actually competing around is SR. So that’s what they should be using to ship matches. Otherwise, you don’t have a true ladder. It’s hidden, rigged, and unethical. And now you’re saying SR isn’t even a measure of skill. It’s “just a number”. What a scam.