the objective of kyc is not for government is to be assure of the particular account so that they will not be commitment of any site fraud with the such a particular account government cannot demand for kyc verification of any account it is that particular platform that will demand for it because they know actually what is their target and there are selective to know people who want to patronize them I think about it should be the essence of having a kyc
It was government that made it compulsory. Though I don't know if your country but from my end it was from the government. And also taxes made casinos to asked the customer to submit KYC when the amount to withdraw is big. And as the Op said as the casinos have seen the benefits of the KYC which are, if the person manipulating the system by using different accounts to play the same game and once they found out the person would lose the two accounts with the amount in the accounts because it is a prohibiting accounts farming.
Some will will go back to the decentralized system while some will not. And that's what will happen if the government withdraw it regulatory policies.