From your description on how an account registration at Chips.gg is, I think it's fine if they ban a new registered user immediately after they detect the IP address is from a restricted location or the user select a country from restricted countries.
It's only bad if they don't ban users from restricted countries, even they know that, and let users betting, then pull the ban card after a big win and big withdrawal request.
Asking for country at the time of registration looks new to me, no other casinos asks such information at the time of registration itself but it's good or bad depends on how they utilize it and instead of banning the user, they should not be able to register in the first place so if things change in the future in their country (by any miracle) then the user can able to access the platform which is win win for both the parties.
But having restricted countries list in the ToS page is kind of mandatory though.
Concerning what you said about now allowing the users from an unsupported country access to the casino, the easiest way is to permanently block the ip addresses of all the unsupported countries so potential users coming from such countries do not gain access to the site, or better still, and maybe more simpler, disable/Grey out the registration and login button/link for user who visit the casino from a country that is not supported.