Gambling winnings are reported on W-2g, not a 1099-MISC.  From the W-2g instructions "File Form W-2G for every person to whom you pay $1,200 or more in gambling winnings from bingo or slot machines".

Whatever was reported on the 1099 was something else.  Or it's just as likely the issuer is using the 1099 to skirt some other state or local ordinance preventing gambling but allowing bingo "prizes".  That's why (right or wrong) the IRS does not recognize it as gambling winnings.

For some reason betting $50 on a hand of blackjack is gambling but betting $50 on Bitcoin is "investing".