> I don't really buy this argument since they could just tax winnings and offer no deductions, but hey ho.

I don't think this would make sense. If I walk into a casino with $200 and then proceed to lose $100 and win it back 10 times, then I lose it all and walk out, that tax law would say I had "won" and had to pay taxes on $1,000 even though any reasonable person would say I had actually lost $200.

In practical terms, I think it would absolutely ruin gambling addicts. This makes it effectively impossible to actually net profit, and I'm doubtful they'll stop.