Not that they refused to do KYC, some of this people might not have the required documents to pass the KYC verification, this is something I have experienced before, there was a time when I didn't have a government issued means of identification, after having been asked to submit one on by an exchange where I was trading on, i had to quickly apply for one.
Personally for me, like I always say, KYC is not something i consider to be bad like some gamblers see it, but then, the way most casinos handle it is very bad, casinos are not supposed to allow a gambler deposit money into their platform if the gambler have not passed KYC verification, but unfortunately, they allow gamblers deposit money, and when its time to withdraw, they ask the user to pass KYC verification, this is very bad and criminal like, regardless of how reputable the casino in question is.
It is unlikely that casinos are going to change their way of doing things, while what you are proposing would be the best approach for gamblers, as in this way they will know from the get go they need to identify themselves at the casino of their choice if they want to gamble there.
This policy will most likely represent very heavy losses for the casino as many gamblers will simply decide to not play there and gamble at another casino which allows them to make a deposit before they ask for KYC.