“buying poker chips with illegal money does not launder money”
True, but cashing in the remaining chips after a small loss is where the 1099 is generated(you don’t cash the chips in at the table) - once tax is paid on the amount on the 1099 the money becomes clean - no need to create a fake 1099 when the casino gives you a real one that the IRS can match with your return - Casino loves the money you lost - IRS loves the tax on the 1099 “winnings” income - everybody happy and remaining money is CLEAN
plus the losses can be offset up to the amount of the “winnings”