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I don't think it should be illegal either, but there should defiantly be limits and protections in place so people don't piss away their life savings over a slot machine.
Often people in difficult finical situations are the most addicted to gambling or playing the lotto because they are manipulated with hopes of a life changing big payout.
One simple idea to help, have a seperate bank account. You get a special "gamble debit card" that you can deposit up to 5% of your earnings from the previous year. Any kind of gambling can only accept this card - including food/drink at the facility. Winnings can be cashed out or used to refill the card.
Even if this isn't a regulated thing, people can do this on their own - leave all the main cards at home and make sure you can't transfer money to your debit without physically going to a bank.