I limit playable races in my campaign for a couple of reasons. One is simply that I don't want taverns to look like Mos Eisley's Cantina. If you have a campaign where races from multiple worlds mix, having any number of intelligent races may make sense, but too many races makes me wonder where they all live and how they continued to exist. We know that until relatively recently (from a geological standpoint) we had multiple humanoid races on earth, but Neanderthal and Denisovans were absorbed or went extinct. I'm okay with multiple in a fantasy campaign because "magic", but there's a limit.
Another reason is that I like to take into consideration how the different races react to each other and interact. I want each race to have their own cultural biases and leanings (although there is variaton). If I have too many races it becomes really muddied.
Last, but not least, in my campaign monstrous races are for lack of a better word monstrous*. Gnolls were artificially created. There are no good gnolls, all gnolls crave destruction and chaos. While they are sentient, they are not furry humans and are simply wired to be CE. That means that if anyone sees a humanoid creature that doesn't match one of the "known" races, it's likely they will be attacked on sight. Not really much different than if a tiger were found near a playground.
*Yes, I know this is overly simplified for some people. While there's a lot of who-can-I-trust and moral dilemas in my campaign, I've never wanted killing monsters to be one of them