Why do chips come into it? Isn’t the process just:
1) Insert cash into slot machine. Play through the cash for a while, losing x%
2) Cash out (machine gives you a printed ticket to take to the casino desk). Now you have a paper trail showing that you won $ from a casino, giving the money a legitimate source.
They don't really have to be common. All you need is a single machine and a disgruntled employee looking the other way.
The most blatantly example I've seen was in Copenhagen, where small gambling dens with slot machines are pretty common. The weed dealers from Pusher Street spent an awful lot of their cash on gambling for some reason. ;)
1) Insert cash into slot machine. Play through the cash for a while, losing x%
2) Cash out (machine gives you a printed ticket to take to the casino desk). Now you have a paper trail showing that you won $ from a casino, giving the money a legitimate source.