Normally, it should be reported to Anti money laundering authority so that this money will not cause them a trouble once the authority tracked the money of the illegal source. But I’m not sure if online casino practice this since they don’t have any physical casino while they operate internationally.
Maybe some of this illegal money will go back to their bankroll then just send to authorities when asked for it.
Casino's are bound by the policies of the government on illegal funds. If a casino demands KYC and they find an amount of money to be illegal they will promptly return it back to the government because they know that holding that amount of money or trying to use it to do business can put them into problems in the future that may threaten their business completely. Online casinos are now excluded because the laws that are binding to physical casinos are also binding to casinos that run online.