Level 11
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Was this slot machines or something else?  If slot machines, keep reading, otherwise I agree with the SOL treatment.

There's an IRS CCM from 2008 that may be relevant:


The IRS also issued a notice of a proposed revenue procedure in 2015 but (as far as I know) never actually finalized anything so I'm not sure it has much value:


You may also want to read the Schollenberger case (and the associated references therein):


If you determine that session treatment is appropriate, I would report a negative "other income" item to offset the W-2g and attach an explanation referencing the cites above.