Robinhood Class Action Lawsuit Alleges Platform’s ‘Event Contracts’ Violate Sports Betting Laws

Man claims he lost roughly $400,000 through Robinhood’s prediction markets, which allegedly function as an unlicensed sports betting platform.

A new class action lawsuit alleges Robinhood is illegally offering sports-related event contracts nationwide, allowing users to place wagers on game outcomes while marketing the products as regulated financial instruments.

The complaint (PDF) was filed by Georgia resident Matthew Mazza in the U.S. District Court for the Northern District of California on June 10, naming Robinhood Markets Inc. and Robinhood Derivatives LLC as defendants.

Mazza claims the defendants have attempted to bypass state sports betting laws and restrictions, by offering wagers on games in the form of event contracts, which are marketed as financial derivatives rather than gambling products. He argues the contracts are functionally identical to traditional sports bets and violate gambling laws in states where sports wagering remains restricted or illegal.

Prediction Market Gambling Risks

Robinhood first entered the prediction markets business in October 2024, by offering contracts tied to the outcome of the U.S. presidential election. The company later expanded into sports-related contracts, launching markets tied to the Super Bowl and NCAA basketball tournaments before broadening offerings to professional and college football and other sporting events.

The lawsuit alleges Robinhood’s sports event contracts are available in all 50 states, including jurisdictions where traditional sportsbooks are prohibited or heavily regulated. According to the complaint, users can purchase “Yes” or “No” contracts tied to the outcome of sporting events, with payouts determined by whether their prediction proves correct. Mazza contends the system mirrors conventional sports betting despite Robinhood’s characterization of the products as investment opportunities.

Following a 2018 Supreme Court decision, sports betting rapidly expanded across the U.S., with platforms such as DraftKings and FanDuel giving millions of younger adults the ability to place bets from their smartphones at any time of day.

However, that growth in popularity has also led to a wave of sports betting addiction lawsuits, which allege the companies used predatory marketing tactics, addictive app features and aggressive promotions to encourage frequent wagering.

The claims maintain that users were targeted with personalized incentives, deposit matches, bonus bets and repeated prompts designed to keep them gambling, even when companies knew or should have known they were showing signs of addiction or financial distress.

Prediction market platforms, such as Kalshi, have pushed that model beyond traditional sports wagering by allowing users to trade on the outcome of elections, economic indicators and other real-world events. According to Mazza’s complaint, Robinhood’s partnership with Kalshi brought those event contracts onto its investment platform, allowing the company to collect transaction fees and other revenue each time users placed trades.

The lawsuit alleges Robinhood presented prediction markets as investment products, even though users were effectively wagering on uncertain future events. Robinhood reportedly described prediction markets as its fastest-growing revenue-generating product line, with more than one million customers trading billions of contracts since launch.

Robinhood Gambling Allegations

According to the lawsuit, Robinhood’s prediction markets expose customers to gambling activity directly within their brokerage accounts, potentially allowing losses to affect investment portfolios and margin positions.

Mazza alleges Robinhood marketed the contracts as a sophisticated financial product while failing to adequately disclose the risks associated with highly speculative wagering. The complaint contends customers could suffer substantial losses, margin calls, forced liquidations and other financial consequences that were not prominently disclosed at the point of trade execution.

The lawsuit also claims Robinhood’s prediction markets may appeal to individuals who avoid traditional gambling platforms but maintain brokerage accounts with the company, exposing them to sports wagering opportunities through push notifications, advertising campaigns and in-app promotions.

Mazza says he lost roughly $400,000, including fees and commissions, wagering on sports event contracts through Robinhood during 2025 and 2026.

The complaint cites cease-and-desist actions and investigations involving prediction market operators in several states, along with warnings from regulators who have argued such platforms may operate as unregulated gambling enterprises without the consumer protections required of licensed sportsbooks.

“As a direct and proximate result of Defendants’ conduct, Plaintiff and members of the Class and/or State Subclasses suffered substantial monetary losses through speculative contracts and wagering transactions that would not have occurred absent Defendants’ unlawful operation and inducement of gambling activity.”

— Matthew Mazza v. Robinhood Markets Inc. et al.

Mazza raises allegations of unjust enrichment and violations of gambling-loss recovery statutes, Georgia consumer protection laws and California unfair competition statutes. He seeks certification of a nationwide class and a Georgia subclass consisting of users who allegedly lost money trading sports event contracts through Robinhood. In addition, his filing is asking for restitution of gambling losses, disgorgement of profits, compensatory damages, injunctive relief and a declaration that Robinhood’s sports event contracts constitute unlawful gambling transactions.

Gambling Addiction Lawsuits

The case joins a growing number of sports betting complaints filed across the U.S., including DraftKings lawsuits and FanDuel lawsuits alleging the platforms fueled gambling addictions among young users through aggressive marketing, bonus offers and app features designed to encourage repeated betting.

Lawsuits allege the sports betting companies used sophisticated algorithms to identify users who appeared vulnerable to developing gambling problems. Once flagged, those individuals were allegedly targeted with customized promotions, VIP incentives and, in some cases, dedicated account representatives. Plaintiffs claim this encouraged continued wagering while minimizing the risks of mounting financial losses.

As concerns about these practices continue to grow, sports betting addiction attorneys are evaluating potential claims on behalf of individuals who suffered substantial financial harm through online gambling platforms.

Individuals who believe they may qualify for a sports betting addiction lawsuit can request a free case evaluation. Attorneys handling these cases work on a contingency fee basis, meaning there are no upfront costs and legal fees are collected only if compensation is recovered.

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