The City Reds were this week fined £10,000 by an RFL tribunal after being found guilty of breaking the rules but were allowed to keep the points gained from their 34-30 victory.
Speaking after the Wolves' 52-6 Tetley's Challenge Cup fifth-round win over Salford, Smith said: "I absolutely think that they should have had the points taken off them. I would hate to have lost that game because our opponents had an extra man out there. I just think it sends out a poor message, that if you are prepared to pay for it then you can get away with it."
He continued: "There are rules there and we all have to stand by them but there seems to be a snub of the rules at the moment."
Salford were defending their line with 14 men after prop Darrell Griffin stayed on for three more plays after being "substituted" and Smith, who argued that a repeat offence in future could cost a club its place in Super League, believes the RFL missed an opportunity to set the right precedent.
"It would have sent a message to all of us that it is up to us to do things right," he said. "It is really worrying.
"It is all our responsibility at the clubs to make sure we are sticking to the rules, especially with the extreme consequences that can happen.
"When they are talking about promotion and relegation coming back in, how would you like to be a relegated Castleford at the end of the season when they may well have scored a try if Salford had 13 men on the field?
"You may think we are going to extremes there but we are not. Ask the players what it is like to have one player put a foot out of position, what effect that can have on your own line.
"To have an extra man on the line for three plays when your opponents are attacking the line, that is a godsend."
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