Robinhood is facing a proposed class action in federal court in San Francisco accusing the company of running an illegal sports gambling business through its prediction markets platform while presenting those trades as investments.
Five plaintiffs from California, New Jersey, New York and Michigan filed the complaint on April 22 against Robinhood Markets Inc. and Robinhood Derivatives LLC. They say they lost money after trading sports event contracts offered through the company’s app and website.
NEW: Robinhood hit with class-action suit alleging illegal sports betting via prediction markets, seeking billions in losses in California court @RWW #PredictionMarkets pic.twitter.com/j9vKRAMSsx
— Suswati Basu (@suswatibasu) April 23, 2026The suit, seen by ReadWrite, says Robinhood “facilitates the sale of illegal and unregulated sports event gaming contracts to its customers through its mobile app and website” and claims users were “led to believe that sports event contracts are a modern, sophisticated form of investing on a federally regulated commodities exchange that can be accessed on a phone.”
The plaintiffs add that, in reality, “the sports event contracts Robinhood sells are old-fashioned wagers on the outcomes of sporting events.”
How the federal lawsuit portrays Robinhood as selling sports contracts
According to the filing, Robinhood began selling event contracts on October 28, 2024, then moved into sports on March 17, 2025 through its partnership with Kalshi. The complaint says Robinhood continued “to maintain the fiction that users were trading event contracts on its ‘Prediction Markets Hub.’”
The filing quotes Robinhood’s own explanation of the product. According to the complaint, Robinhood says, “[a]n event contract is a type of financial derivative that allows traders to speculate on a specific event. These contracts are generally structured around ‘Yes’ or ‘No’ positions, and fluctuate in price based on the projected occurrence of the event.”
It also quotes Robinhood as saying that event contracts “pay out if the position held matches the correct occurrence of the event; otherwise, they expire with no value.”
When Robinhood launched its Prediction Markets Hub in March 2025, the complaint says JB Mackenzie, the company’s vice president and general manager of futures and prediction markets, stated, “[w]e believe in the power of prediction markets and think they play an important role in the intersection of news, economics, politics, sports, and culture. We’re excited to offer our customers a new way to participate in prediction markets and look forward to doing so in compliance with existing regulations.”
Later, when Robinhood added football contracts, Mackenzie said, “[a]dding pro and college football to our prediction markets hub is a no-brainer for us as we aim to make Robinhood a one-stop shop for all your investing and trading needs.”
The plaintiffs argue the products work the same way as sportsbook bets, pointing to markets that they say mirror “Moneyline bets, point spreads, totals, player props, and parlays.”
The complaint also notes growing legal pressure on prediction markets tied to sports. California tribes have separately sued Kalshi and Robinhood, Nevada previously forced Robinhood to pause sports contracts there, and a federal judge recently halted Arizona prediction markets.
It quotes New York Attorney General Letitia James as warning, “[p]rediction markets may appear as modern, high-tech platforms for speculation or ‘forecasting,’ but in practice, many operate as unregulated gambling without the basic protections New York consumers both deserve and expect from properly licensed operators.”
The suit seeks class-action status, restitution, damages, injunctive relief and attorneys’ fees. Robinhood had not answered the allegations when the case was filed.
Featured image: Robinhood
Robinhood faces new federal lawsuit over sports contracts framed as investments scheme ReadWrite.
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