For sure money laundering is the main reason why it requires high level to unlock this feature although it can be achieved easily by those laundering money by simply playing low house edge game considering the bankroll they have for this purpose.
As a normal gambler that wants to convert fiat to crypto and vice versa I doubt this feature is very helpful at all considering the fees and exchange rate of BC.
They charge percentage basis fee on fiat withdrawal which is very high if you have high bankroll amount. It’s better to use big exchange P2P than the swap feature of casino.
All businesses must defend themselves as best as possible and obey existing laws for example KYC and AML policies and reguations from governements are very vital for their business existence and survival over time.
Centralized exchanges, centralized online gambling sites can be chosen as destinations for money laundering if there are no strict regulations. Criminals surely know where to do money laundering and if centralized platforms are not carefully in operations, ToS on deposit and withdrawals, KYC, they will be most favorite targets of criminals and money laundering activities.
I don't mean KYC is not dangerous for privacy but with business nowadays, KYC and AML are what they must follow.
Definitely, this is the exact reason why I do complete KYC on casino that has license to operate and good reputation.
There’s no way a legit business can operate without following the law especially AML policy so I totally understand the importance of what sure here that is good information to fight money laundering.