I took tax this year and have the following to add: First, TorontoCFE knows what he's talking about, listen to him, he is way more knowledgeable than me, but in case I add something helpful here it is.
Some cases:
MNR v. Morden [1961] CTC 474 (Ex Ct): The court held that even if a gambler does not treat it as a business, with the right level of organization and intent, a taxpayer could be in the business of gambling and therefore income is taxable.
Lala Indra Sen (1940) 8 ITR (Ind.) 187: “…try to see what is the man’s own dominant object – whether it was to conduct an enterprise of a commercial character or whether it was primarily to entertain himself…”
Leblanc v. The Queen [2006]: Two brothers spent an inordinate amount of time and money playing sports lottery games. The appellants lost most bets but won a huge amount on long-shots, and employed runners to pick up tickets from the stores. Court held that number of bets not determinative. “The appellants are not professional gamblers who assess their risks, minimize them and rely on inside information and knowledge and skill. They are not like the racehorse-owner, who has access to the trainers, the horses, the track conditions and other such insider information on which to base his wagers.
Nor are they like seasoned card players or pool players who prey on unsuspecting, inexperienced opponents. Rather, they are more accurately described as compulsive gamblers, who are continually trying their luck at a game of chance.”
<ul type="square">[*]this obv implies that "seasoned card players'" income would be assessed differently[/list]
Also to be considered is that capital gains are taxed at only 50% of the normal rate. I wonder if you could convince a court that your bankroll is capital (which it essentially is), such that any increases are treated as capital gains. Of course its hard to argue your winnings are due to appreciation of capital.
Finally, section 245, the anti-avoidance Rule, essentially that you can't make any transaction i.e. do anything sketchy that technically is legal according to the letter of the law, but is really against the spirit of the law and the transaction is really just a tax-avoidance transaction.
The Queen v. Canada Trustco Mortgage Co., 2005 SCC 54 is the authority on that.