What is so great about individualism?

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What is so great about individualism?
I teach two populations who have quite a long history of collectivism: Chinese and Japanese.
OK, the Chinese also have a history of personal entrepreneurship.
In an English media class, we read a recent article about the latest scandal surrounding the Japanese Sumo Association. This concerns “illegal gambling“. What is “illlegal gambling”, I asked my students. “Gambling which is not permitted”, they answered.
“Yes,” (through clenched teeth), “but why is it not permitted?” No answer.
Gambling is not permitted in China, except in certain areas, we learned from our Chinese students today.
I briefly explained the concept of “victimless crime“. However, from a collectivist standpoint, there is no issue: the government has decided that certain activities are out of bounds (illegal) and that is that. How do I counter that?
Libertarian Laurence Vance comments that “illegal gambling” is “gambling in which the state doesn’t get a cut”.
My question is, why is the State deciding what individuals can and cannot do, wrong?
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