The majority of the work that this adjustment does is due to the assumption that an action with high variance is practically as likely to greatly harm as to greatly help, and thus the long positive tail is nearly canceled out by the long negative tail. For some Pascal's Muggings (like the original Wager), this may be valid, but for others it's not.

If Warren Buffett offers to play a hand of poker with you, no charge if he wins and he gives you a billion if he loses, some skepticism about the setup might be warranted- but to say "it would be better for me if we played for $100 of your money instead" seems preposterous. (Since in this case there's no negative tail, an adjustment based only on mean and variance is bound to screw up.)