Luckless Elves are an Elf brand.
Luckless elves can be assumed to have a negative trait that causes "bad luck" in combat - this may be a simple subtractive effect, such as a -2 to all results, or it may be a "roll twice and use the worse result" effect, or perhaps all opponents get a bonus against them. Perhaps it is a form of natural luckamancy that benefits the opponent. However, if this were the case, the Luckless elves would likely have been left out of the coalition, so whatever it is, it probably only affects the Luckless elves and their direct opponents, and not the overall battle. It would seem luckless elves are only useful as cannon fodder, and may have low overall stats and abilities.
It is unclear what may balance these negative traits - perhaps they are simply very cheap to pop and upkeep (for elves), or perhaps they have huge bonuses in particular, unlikely scenarios (such as fighting uncroaked in a tundra hex) or occasionally pop very powerful warlords/casters, or have some sort of social/political bonus. They may also be useful for (rare) situations in which bad luck is desirable.
Of course, Rob has reserved the right for comedy to trump game rules, so "Luckless Elves" may simply be a name chosen for humor's sake.