I've had several people with similar behavior in my family, including my immediate family, so I'm somewhat familiar with the problem.
First of all, any type of self-destructive behavoir requires an enabler. In the case of morbidly obese people, the enabler is those who continue to bring them food once they can no longer physically get it or prepare it themselves. In the case of your brother, you and your sister are the enablers because you continue to "loan" him money despite being aware that he is using it to finance his addiction. I put loan in parentheses because I'm quite sure when your brother borrows the money he has absolutely no intention or ability to pay it back, even if he has in the past.
Second, this has gone past the point of being a hobby or even a relatively healthy obsession. As you have observed, it has become an addiction. However, unlike a substance addiction where there is a chemical dependency it should be possible for your brother to conquer this with help from the right people. You and your sister are probably too close to the problem to be able to help him here, but by shutting down the supply of easy money he might be forced to limit his poker just by virtue of the fact that funds will be harder to obtain. By limiting it and concentrating on other things instead he will hopefully gradually conquer it.
Third, I fully understand your dilemma about telling your parents but I'm sure they're already aware that something is wrong with your brother. While it's normal for grades to drop a bit while you're getting used to college work any long-term drops are indicative of a problem. I'm not sure of the results you would get telling your parents anyway. Many parents will be in denial when they are told that their child has a problem, whether the problem is gambling, drug addiction, depression, whatever. If your parents are like this, then they're going to need some sort of preparation before breaking the bad news to them. If you can't bring yourself to tell them, at least hint that maybe they should be giving him less money. Say he's blowing it on CDs, DVDs, clothes, or other consumer junk rather than gambling. This won't be considered as disgraceful and at least you will slow down the money train a bit.
Fourth, I also think your parents should try a carrot/stick approach here. His gambling is a problem not only because it is costly but also because it is affecting his grades. You are right-there is little point going to college if you're not going to do your best. I remember quitting my work study job precisely because it was affecting my grades, for example. When you're in college you should devote 100% of your energy to your studies. That means no gambling, no dating, no going out with friends, etc. while school is in session. Save the recreation for breaks and summers. Anyway, your parents should lay down the law and threaten to put him out on his own unless he takes school seriously. They should also assure him that if he does well in school, they will fully support him not only until he graduates, but afterwards until he is ready to be on his own. This might wake him up given that it's virtually impossible for a single person to support themselves in NYC, especially one without a college degree. I have a degree from an Ivy league college, yet at 42 I'm still living with my parents for various reasons (I do contribute in kind with a lot of chores and home improvement projects). I can't imagine someone with only a high school diploma being able to make it. It's far easier for a person to go out on their own when they're ready to. Most of the people who were forced to at early ages are still living like crap when they're 50. He might well imagine himself homeless or worse and straighten out.
Fifth, you didn't mention whether or not your brother has a car. Easy transportation to/from gambling dens makes conquering the problem harder. Therefore, if your parents are paying for a car for your brother try to get them to stop. You don't need a car in NYC anyway. If he has to spend hours on public transportation getting to/from any places he might go to play poker that might slow him down a bit. Sure, these places are everywhere, but I think you get the idea. The harder you make it for him to continue his habit the easier it will be for him to end it.
If your brother has any close friends you might try to get them to help your brother. He would probably take advice from someone outside the family more seriously than he would from you or your sister.
If it won't cause any more family friction, you might want to let your sister read this thread. I saw lots of good advice here. Be aware that unless something changes the problem will likely get worse and worse.
Best of luck with this. Family problems are always the hardest kind to deal with.