...Is it fiat payment methods? Is it that casinos holding users money? — these two are top of my head, you tell me more.
So, why not remove whatever those things are that makes casinos necessary to be regulated? Meaning — stick to crypto deposits, don't hold users funds (i.e, become non-custodial).
Does that get rid of casinos requiring to be regulated am I being ignorant about scheme of things?
Governments have recognized that cryptocurrencies are also a form of money, so online casinos are dealing with money, so they need a license to operate and they need to follow the financial laws adopted by all countries in the world. Regulation also serves to protect people, although this has not been very effective in cases of problems that people have had with some scam casinos.
Even so, I will give an example: imagine that you were robbed by an online casino and you are going to complain to the court in your country. In this case, the police in your country will first investigate whether the casino has a license in your country and, if not, in which country it has a license.
Then the police send an email notification for the casino owners to come to your country to provide explanations. If they refuse, the judge will issue an arrest warrant. In this case, if the casino has a license in country Z, then in country Z they will have all the details of the real owner and the judge in your country You can ask your country's embassy in country Z to send the arrest request to the court of country Z, as the casino has a license it will be easier to arrest the casino owner. Now if they were not regulated, then they would never be arrested.