Robinhood operates unlicensed sports gambling platform disguised as investing, class action claims

Georgia resident Matthew Mazza filed a class action lawsuit alleging Robinhood Markets and its subsidiary Robinhood Derivatives run an unlicensed, illegal sports gambling operation marketed as an investment product. He filed the complaint June 10, 2026, in the U.S. District Court for the Northern District of California.

The suit targets Robinhood's prediction markets hub, which lets users bet on sports outcomes in all 50 states, including those that ban sports gambling outright. Mazza seeks to recover billions of dollars in wagers for a nationwide class of users who lost money on the platform plus a separate subclass of Georgia residents.

How Robinhood allegedly turned trading into sports betting

Robinhood started selling event contracts on Oct. 28, 2024, beginning with the 2024 presidential election. On March 17, 2025, Robinhood launched its prediction markets hub and began offering sports event contracts through a partnership with Kalshi, a federally regulated exchange.

In December 2025, it added combos and player contracts that the lawsuit claims mirror standard sportsbook bets like point spreads, player props and parlays, the same wagers offered on DraftKings and FanDuel.

Traders bought more than 12 billion event contracts on Robinhood in 2025, and the company booked $302 million in transaction-based revenue for the year, a 260% jump it linked mainly to prediction markets and instant withdrawals. On Feb. 8, 2026, traders put an estimated $285 million on the Super Bowl LX winner alone.

Betting with borrowed money

Mazza says he lost about $400,000 in fees, commissions and wagers on the platform in 2025 and 2026. The complaint alleges Robinhood let him and millions of others bet against margin using their existing stock holdings, meaning customers could wager with borrowed money and lose more than they put in.

Robinhood's marketing and app design did not make that risk clear, the suit claims. Consumers would have needed to read long legal agreements to see the warnings about margin calls, forced sales and losses beyond deposits rather than viewing them at the point of trade.

The class action also alleges the platform drew in people prone to compulsive gambling who avoided betting sites but kept Robinhood brokerage accounts.

Why regulators are scrutinizing prediction markets

In February 2025, the U.S. Commodity Futures Trading Commission pushed Robinhood to pull its Super Bowl LIX contracts, which the company did before relaunching sports contracts the next month. Regulators in at least 11 states sent cease-and-desist letters to prediction market operators, arguing the contracts amount to unregulated gambling.

Ahead of the 2026 Super Bowl, New York Attorney General Letitia James warned residents that prediction markets often operate as unregulated gambling. In May 2026, Minnesota became the first state to outlaw them by statute, and a bipartisan federal bill, the Prediction Markets Are Gambling Act, reached the Senate in March 2026.

What the lawsuit claims

The complaint brings five counts against Robinhood:

  • Civil gambling-loss recovery statutes in 29 states and the District of Columbia, which let people who lose money to illegal gambling sue to recover it
  • O.C.G.A. § 13-8-3, Georgia's version of the centuries-old Statute of Anne, which voids gambling contracts and lets a loser sue the winner within six months then lets anyone sue as a public "relator" for up to four years
  • Georgia Fair Business Practices Act, a state consumer protection law against deceptive and unfair business conduct
  • California Unfair Competition Law, which covers unlawful, unfair or fraudulent business practices and applies because Robinhood is based in California
  • Unjust enrichment, which says one party cannot unfairly benefit from another party

In Georgia, where commercial gambling is a felony and the state constitution limits legal gambling to the lottery, charitable raffles and bingo, the lawsuit alleges every sports contract Robinhood sold broke the law.

What the case means for Robinhood users

There is no settlement, no claims process and no money available now. The lawsuit asks the court to order Robinhood to return users' wagers and losses, give up its profits from the contracts and stop offering them.