I suppose they can stuff it in the mattress also, but does this avoid some IRS rules about trading in high amounts of money and having to make notification?

You would know best, but isn't there a law about cash payments and high buyins that would send up a signal? Otherwise, the perfect money laundering system is still in place.

Buy $100,000 in chips, play both sides of every bet (two players needed of course) the players cash out and it's not cash anymore, but Gambling win or loss?

Take the chips "home" and when Louie comes to town, he pays cash for chips and his money is now clean.

I'm sure there are more variations on the game.