In the casino's business side, this is bad. But for the people, the consumer, which the main goal of the government to protect, it's perfect.
Also, the chance of revenue that the government will get from casinos' taxes/fees could decrease because of this, less revenue for casinos could affect the revenue that by government gets from them (not sure about this).
It seems you dont understand that this is not going to change anything for the people. Gamblers who wants to spend more of their money gambling can have multiple casinos, splitting the money across those casinos online to gamble. So yea, if you look at it on the other side, the idea is a great one but it wont stop real gamblers, it will only push them to find an alternative way. Apart from taxes, KYC or total restriction, the government can hardly regulate online casinos and gamblers in general.