Setting aside for a moment whether or not this specific legislation is a good implementation of the idea, I cannot understand how people don’t comprehend that this only happens because there is currently no obligation to release their server binaries or code.

The second that becomes a legal requirement with associated penalties, developers will stop licensing technology under those kinds of terms.

Why would developers stop licensing? They will just tear the middleware out and release as-is, leaving the community to fill the API gaps.

Right, they'll stop licensing proprietary sever code. But that in turn drives up the cost of game development since they'd have to either purchase redistributable licenses or develop their own networking software.

I suspect companies will just scale down the servers to 1 instance with bare minimum support. Technically the online service is still active, thereby eliminating the requirements to distribute source code, even if it can only handle a handful of active players and terrible latency.