Obviously it depends on the regulations, but a lot of regulations are about making sure that there's at least a minimum bound in the "quality" of products offered, because of the asymmetry at play here. If there is none, we can end up with "bad" products(that don't seem bad because we're uninformed) crowding out "good" ones, and having the entire market be worse off.

The 2007 crisis was a perfect example of asymmetry causing markets to crash: obviously there's the whole aspect of consumers being mislead on their mortgages, but there's the even greater aspects of banks misleading each other! Because of the opacity of the market of derivatives (nobody knew just how invested everyone was in on certain obligations) no bank could make informed decisions on what to do with their positions.

If we don't restrict some choices in the short term, then we can end up with no choices in the long term. In areas of extremely high uncertainty, regulation (notably concerning transparency) is necessary to make the market freer (in the actual definition, not from the common usage of free=no regulation).