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Absolutely disgusting.

But why does the Alabama court say that this is the end of the line? Why can't this go to SCOTUS?

Probably a federal issue
I think it has to do with it being on a reserve
Feds have ultimate jurisdiction.
The Alabama Court didn't say it was the end of the line, just thst, whether or not sovereign immunity applied, Alabama courts had no jurisdiction to address the case, because Alabama law would deny the plaintiff any basis for recovery since gambling is illegal.
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So the gambler brought the case to the tribal court of the Poarch Band of Creek Indians where it was dismissed, then took it to the Alabama state court system.

It looks like the Alambama Supreme Court ruled it had no jurisdiction over the case [1].

Some interesting allegations:

Rape alleged that at that point he was approached and congratulated by casino employees and patrons and that one casino employee said to him: “[D]on't let them cheat you out of it.”1 Rape alleged that the machine printed out a ticket containing the winning amount of $1,377,015.30 but that representatives of Wind Creek Casino took possession of the ticket and refused to return it to him. Rape was then taken by tribal officials or casino employees into “a back room,” where they discussed how Rape's winnings would be paid, mentioning the possibility of a structured payout over a period of 20 to 30 years. Those officials then instructed Rape that he had to wait outside the room while they “called PCI” to confirm his winnings.

I checked several sources in addition to the Ars article, and it's interesting that nobody is reporting what the max payout on the machine was. Although without jurisdiction I suppose that doesn't really matter wrt the court case.

[1] http://caselaw.findlaw.com/al-supreme-court/1875570.html

Back when I dabbled in bitcoin, one of the coolest things to me was the cryptographically verifiable casinos. To explain simply, the hash of each day’s seeds were published the day before, and the actual seeds posted the day after. So you could verify that your wins and losses were legit.

This could be applied to casinos, but it would take legislation to require it. I doubt any casino, especially the ones in sovereign Native American lands would voluntarily adopt such a system.

I like this. Can be done with just PKC; don't need the tech of any blockchain.
Or using Ethereum-style smart contracts you can go one step further, and have the casino be implemented by a public program on the blockchain. That way, it's not only verifiable after the fact if the payout was correctly handled or not, you can verify before you play that it will be, and there is no way for the casino to not pay if you win.
Somewhat off-topic, but this man Jerry Rape has a very unfortunate last name. If I had a last name like that, I'd have been looking to get it legally changed the day I turned 18.

I mean, c'mon...imagine if he wanted to become a school teacher and children had to refer to him as "Mr. Rape".

I don’t know what nationality that name is from but it might not be pronounced the same as the horrible act you’re thinking of. English may also be a second language in which case he may not be familiar with the negative association.
Is there more to that side of the story, like the machine having a maximum payout?

The sovereign immunity thing isn't the real story, I've seen New Jersey state use circular legal logic to prevent casinos from losing.

Those machine have a disclaimer posted, saying malfunction will void payout. If they have big latitude on what they consider "malfunction" it sounds like a big scam and we all should stop patronizing them.
It would be nice if the casino lost more than $1.4 million in revenue because of bad publicity, but that's probably just wishful thinking.
The casino prohibition against "counting cards" in blackjack works the same way. How does one not notice and unconsciously count the cards played face up in a card game, then later on act on hunches coming from the back of our minds? "Counting cards" is a vague definition that enables the casino to void any customer's winnings at a blackjack table.
Where it gets even more vague is that they do want card counters, just not the ones who are good at it.

Shuffle with replacement between every round will eliminate card counting.

Card shuffling and deck replacements take time, and time is money in a casino. Keeping an eye out for card counters and sharing blacklists with other casinos is cheaper than slowing down the operation of all their blackjack tables.
They can’t actually void your winnings for counting cards (in e.g. Vegas) — they can just kick you out.
If they are sovereign and cannot be sued, I'd imagine there should be a border and customs union controls, and complex and details trade agreements?
US States also have sovereign immunity, without any of those things.
If this incident happened in a state Casino, there would be a means to sue them.

If Tribes are protecting their scams under 'sovereign immunity' then they should lose that immunity.

I'm pretty sure most tribal casinos have their machines "malfunction" in order to not pay out millions to the winner. It is easier to bring the winner into a tribal "court" battle (which will then be dismissed) versus just paying the winner. It's a sleazy tactic that shouldn't be allowed but it isn't an issue most people would want to get into.
This is the same BS that Indian Tribes are using to hold patents and fight IP lawsuits.... Come on!
I experienced this with a Trivial Pursuit quiz game in London. Three times I was doing well and it rebooted.

Is this standard practice in betting to avoid a payout?

Those touch screen quizzes in pubs have a pretty low maximum payout anyway, and are known to be progressive (they have a memory of their payout history and a bank of practically impossible questions to ensure they pay out the right amount). I suspect it was just not ventilated correctly.