Creating a company with the intent to circumvent the law is definitely something that should be punishable with stricter measures than simply breaking the law directly.
It is the same argument that a "sovereign citizen". The "I do not recognize your law" kind of stupidity. The only reason they have not been long in prison is corruption at the highest level at the White House.
They're being threatened with prion time because they broke state law. That the federal government is looking one way while states another is not the cause of the jail time threat.
They should be thrown in prison for knowingly violating a law. Trying to play a semantics game (prediction market vs gambling) to get out of it is just scummy. Everybody knows it is gambling.