1) If SPC Manning was talking recklessly to Lamo, Lamo had to assume he was also talking to other people, and generally behaving recklessly. Manning was going to get caught. If Lamo didn't say anything, but Manning later was caught, it would be likely discovered that he'd confessed to Lamo as well. This would not be good for Lamo, especially if that information were not yet public knowledge. An investigator might suspect conspiracy, and might suspect Lamo had data -- he could then be subject to intelligence activity or law enforcement activity himself.

2) If he cooperated with authorities in secret, it's likely his involvement would become known later once the trial happened (or at any time of Manning's choosing). People who interacted with Lamo between his initial contact with Manning and the eventual disclosure would be afraid they had been compromised as well.

I think Lamo was in a difficult situation even if he didn't want to turn the guy in.