> extremely stupid to be making something that is
  > illegal to use in your jurisdiction

He was making it in the jurisdiction, but selling out outside of the jurisdiction. He was making gambling software and selling it to businesses in locales where gambling is legal.

If he was making slot machines and selling them to legal casinos (e.g. in Las Vegas), do you think that he would have been busted like this? Highly doubtful.

This happened because his customers were crossing the line with the product, but -- to carry the analogy -- I doubt a slot machine maker would be held accountable if Caesar's Palace decided to open up an illegal gambling operation with the slot machines. The issue here is that the main offenders (foreign casinos) are outside of the state's jurisdiction, so they are going after the only person that they do have in their jurisdiction.