Because regulation, even when well-meaning, acts as a barrier to entry and keeps competitors from even getting off the ground. Stifling small companies stagnates the industry and smothers innovation.

You can play whack a mole with their bad behavior, but large companies can come up with new dark patterns way faster than you can regulate them with precise and well thought out regulation. You just end up with entrenched interests and an ossified industry.

That's not even touching on regulatory capture.