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This is a bad example because in many states they're required to offer free tap water by law.
Really? Which states? Pretty sure there are no state or federal laws. County maybe? I do know in California, it's a state law that restaurant customers must first request the water, before they can be provide the free tap water. I think it's just a misnomer that some states require free tap water for customers.
I'm in the northeast and most (if not all? I don't feel like checking every single state along the northeast coast) of them have laws saying that tap water must be free if it's offered. The only gotcha there is that restaurants don't technically have to offer tap water, but that exclusion is probably only there because of water contamination issues. That being said, I've also never seen a restaurant not offer tap water even in places where I definitely wouldn't want to drink it. It's like this in all of the tristate area. The bigger cities like NYC additionally usually have stricter laws closer to what California has.
I was just trying to be gracious. You are citing a misnomer. The water is free because of competition, not because of any law that forces the restaurant owners to give the tap water away for free.