Let’s be specific, this is about sportsbooks, not casinos.

And yes, arbitrage betting is not illegal. Because of that, sportsbooks can’t really do much about it, since it’s not a violation of any law or most terms of service.
What I’m saying is, sportsbooks can’t create TOS that go against legal standards. So if they ever catch someone doing arbitrage (which is actually rare), they don’t have the right to confiscate your balance or winnings.

However, they do have the right to limit or ban your account from using the sportsbook again. That’s within their control.