Green’s Dictionary of Slang

sponge n.

also spunge
[their absorption, whether of alcohol, knowledge or another’s favours]

1. [late 16C+] a heavy drinker; thus spongy adj.

2. [17C+] someone who lives through cadging off others, thus spongy, cadging.

3. [mid-19C] (UK Und.) a fool, a naïve countryman.

4. [mid-19C] (US Und.) a miser.

5. [1920s–30s] (US Und.) a prohibition officer.

In phrases

chuck up the sponge (v.) (also chuck in the sponge, fling up..., throw in..., throw up…, toss in..., chuck the sponge in, throw the sponge in) [boxing imagery]

1. [mid-19C+] to give in, to surrender.

2. [1910s–30s] to die.