... Most of these guys are not even worth $2500, is that what they are coming to your house to rob you for?...
People often take this too far despite completing KYC with banks and many other formal and informal establishments (brokerages, hotels, hospitals etc.).
If your personal information/documents fall into the wrong hands then you have no idea what they can do with it. It's not only about knowing where you leave and the risk of getting robbed. Your personal documents can be used in illigal activities such as scamming other people. They can use it to create accounts in your name on some exchanges for example and use it for money laundering...
Submitting your personal documents to your bank agency is not the same as submitting them to an online casino.
You have a point there and I must say that I am already aware of what you said as well. This is why one must ensure that they are not just gambling anyhow, they should gamble with those casinos that are big and serious enough and that can take security as a priority. Also, banks are not so different in the matter of data leaks, this is because it is human beings who are behind its operation as well and not some angels. If you know what many bank employees are doing all in the name of money, you will be amazed, so we should not exonerate them in this. Reputation, security and integrity matter here. Moreso, this is the reason why we should not just see a new casino and register there without thinking it through, why won't they leak your data?
Data leaks are not even peculiar to casinos or any formal or informal settings, banks and financial institutions' data could leak, hackers could infest them and we've seen a lot of government and private establishments where client/customer data got leaked. I've also done KYC with some formal financial establishments where afterwards I would be receiving strange calls and emails, so data leaks every time. But I am not saying this because I believe it is good but just not to exonerate the bank from it. As for the usage of one's data elsewhere, it is also not uncommon, but they do not necessarily need to lay hands on one's document before using one's profile and data all the same, they can doctor it, so risk is everywhere in this digital age.
Regardless, KYC completion is a standard and international procedure, and of course, it has its pros and cons, but no matter how we try to defend or reject it, we must obey in most climes.