The challenge is that this method can be easily circumvented by creating a new wallet and play again due to anonymity. It is said that this can be fixed by implementing KYC. Blockchain plus KYC will identify the player even if the player creates multiple addresses.
There are existing nonKYC gambling sites till today. If something like this happened, more people will move towards the nonKYC gambling sites instead.
What is good about this strategy is that blockchain record can be shared globally, so the tagged address can also be blocked by other casinos, preventing the person to deepen its gambling addiction by preventing them from indulging in online gambling.
I do not think gambling sites will cooperate to this extent. Even the gambling sites in each country have not cooperate to this level.