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Although you are right in regards of hedging your funds, I think when dealing with gamblers, we should care about their fate too. If you know for sure that someone wants to borrow money from you to gamble with it later, you better don't loan the money to them at all, with collateral or not. Maybe they will be mad at you at first, but they will thank you later.
It may go either way. If someone will borrow money from you to be used for betting and that bet won but since you did not lend him, he will definitely be mad at you. But either way, you should not lend to people who will just use the money for gambling. They are not to be trusted. Who will trust someone who does not have the money but still wants to gamble? That attitude reeks of lack of discipline and out of control gambling urge.
Sometimes it's easier to lend money to someone than to explain them why you can't (or don't want to) lend them money, but if you know for sure that it's for gambling you better take the trouble to explain that person that they are about to enter a very dangerous road, and that it's better for them to hold off. And it doesn't even matter whether it's a small amount or not. You just don't do that, you don't borrow money for gambling, ever.