Regulation is not as horrible a word as illegalization. With that in mind there are a number of different compromises that could allow governments of the world to get things that they want while allowing the people and businesses in their borders to participate in what they want. As the issue is examined it should be noted that there is often more in consideration than money for the governments. There is also the welfare of the country's people. These things considered let us look at some of the options.
In the beginning there will be none. Of course, that is a farce as nearly any idea of absolutism is in the real world, but we will begin there, as it is, in a farce. No one can gamble online. No one can operate an online gambling site. There is no online gambling within the borders of the country. What happens in this situation, as has been shown, is that some people cross the border. Some businesses set up servers outside the borders. Illegal sites and illegal gambling happen. There is a general dilution of the idea that being the government is striving for. There is another way of looking at it. The people did not really want what was being demanded by the government.
Enter legalized online gambling. The residents within the borders are now allowed to gamble online if they want to. Gambling can further be divided into two things: casino games and wagers on events. Now taxes and fees can be charged on gambling transactions that originate from within the borders. Fewer people cross the border to gamble, but companies still do.
There is a decision to be made about whether to allow online casino (servers) hosting within the border. There is the potential for more revenue, and there is typically not the same stigma that exists with walk-in casinos. There is a fundamental difference in the eyes of most people. Regulation could be strict though, requiring a license and fees and taxes and specific requirements for foreign companies to host within the borders.
It may seem cut and dry to those that simply want it or do not. The reality for those that give it thought though is something less definite, so far.