When I inquired from the attendant, she said he was a regular customer and that he usually raised money for gambling through the manual jobs he does around the area. She also told me that he has never misbehaved and acted violently in the gambling house so she was comfortable with him.
You could see he is not mad but probably mentally challenged which can come and go like temporary. There are people who are like that mentally that you only notice them when that moment come to them.
There is a different analysis to this story. He might be gambling before that challenge came to him which can explain why he still retain the ability to gamble and visit the gambling shop. Or he is not mentally challenged in the real sense because someone in such condition may not have the cognition to know how to gamble.
My question now is are there any moral, ethical or legal obligation to bar a person from gambling after physically observing that he is mentally unstable?
If from what the story is that he walks into a gambling shop and does what others do in peace and leaves, I don't think there is a reason to deny him freedom of association or any other if he is of gambling age. In fact he may not be that challenged mentally not to know what he is doing.
Some people who are drug addicts sometimes looks like street mad people when they appear in rags and look unkempt. Like you stated, he's of age and exhibits good behavior, so, I don't see anything that should disqualify him from doing what makes him happy.