You are going to be gambling with money after all, so it does not matter if you are using fiat, or crypto, or any other thing that can be considered as money.
The only bad thing is that you are losing a bunch of bitcoins if you are betting/gambling with considerable amounts of money.
That is the only bad part of it
I think it's different if we use fiat or crypto as betting because if you use crypto, you can use many coins as the option and you can buy some amount of coins with limited money. For example, if you have $100 and you purchase dogecoin, you can get almost 46735,75906369 dogecoins, and you can use it all in one-time or split into several parts, and you can play for one day only or a few days. When you lose 10k dogecoin, you still have the rest amount, and you can come back in the other days. And if you use the money, let say $100, you still use and lose $100, you are losing all the money.
But yes, in the end, we will lose a bunch of bitcoin if we choose bitcoin as the bets and well, we cannot recover that lose because we need the luck to win the game.