As you say:
***NO KNOWN Chips ....that I am aware of***

From the caption below the first picture, it appears that they used cigarettes for chips, then cashed in their cigarette winnings nearby. In those days it was probably a nickel (or less) per cigarette.

I'd hate to actually smoke those second-hand cigarettes after being handled by everyone in the game!

As a side note, in Japan, the Pachinko Parlors do something similar, to get around the no-gambling laws there... though trinkets, not cigarettes.