They don't trust the casino as the casino might misuse the kyc documents or the gamblers want to gamble without telling anyone that they are the gamblers, gambling is illegal in their region or religion and they want to hide their identity or there could be any other solid reason?
You already stated the obvious, what else can I add
As for me, I don't mind whether the casino requires KYC or not. We already had a Data leak in one of our Gov't institutions, the one that compiles voters in our country, what else can I hide lol. Online gambling is legal (I suppose it is) in our country and most Casinos do not blacklist the access of our country's IP.