I'd do both. If I suddenly came into a large sum of money, the plan is as follows:
1) Secure enough money in savings for interest to cover basic living expenses, thus eliminating the need to work.
2) Buy a home, paid in full (and with enough in savings to cover property taxes with leftover for maintenance.)
3) Pay off familial debts and/or provide expensive necessities (homes, cars, etc.)
4) Frivolities (like media & gambling) and charity.
Gambling is something to be handled with great care- it shouldn't be your retirement plan, and no money should be applied to it that's necessary for anything else. However, if handled with great care, it can be a fun way to pass an afternoon. Example: there's a local casino with a membership program where, after you check in & play for 2 hours, gives you a $15 food voucher-enough for the buffet. So, if you can stretch $15 on penny slots over two hours, then it's effectively a no-lose situation.
If you can trust yourself to not get caught up & overspend, it can honestly be interesting to analyze the games as you play, see how they hold up as an actual game (answer: usually terribly) and what their gimmick is to get you to spend more money. My favorites tend to have multiple 'bonus games', which gives a feeling of accomplishment for reaching the bonus, even without necessarily letting you win big. The most insidious gave the illusion of improved odds for faster betting, encouraging button mashing without thought of how much it cost.
