On the other hand, the city did sell the medallion under the promise of keeping competition out. Aren't they scamming the medallion owners by not doing so? Even if we think the medallion system is corrupt and/or unjust, why should the buyers be the ones left hanging, while the city which created the system walks away with the money from its sale?

The medallions are still the only way to run a yellow cab - nothing has changed with regards to that. It'd be like cabbies complaining that new subways were opening, or the busses got better, and their business was going down.