Robinhood Faces Class Action Over Sports Event Contracts

Robinhood has been sued in federal court over claims that the prediction market operator's sports event contracts operate as unlawful sports bets, not financial products. 

The class action was filed on June 10 in the US District Court for the Northern District of California. Georgia resident Matthew Mazza named both Robinhood Markets Inc. and Robinhood Derivatives LLC as defendants. He alleges the company used prediction market contracts to offer sports wagering across the country while presenting the activity as regulated trading. 

The complaint centers on contracts tied to sports outcomes. Users can buy positions based on whether a result will or will not happen. Mazza argues that structure mirrors conventional sports betting, regardless of the financial wording used around it. 

The lawsuit says Robinhood made those contracts available in all 50 states. That includes states where online sports betting is illegal or limited by local regulation. The complaint says this allowed Robinhood to reach users outside the normal sportsbook licensing system. 

Robinhood entered prediction markets in October 2024 with contracts linked to the presidential election. It later expanded into sports, including the Super Bowl, NCAA basketball tournament markets, professional football, and college football. The complaint also says Robinhood's relationship with Kalshi brought event contracts into its brokerage platform. 

Mazza says he lost about $400,000 trading sports contracts on Robinhood starting last year and continuing into this year. His lawsuit seeks class certification, restitution, damages, disgorgement of profits, injunctive relief, and a declaration that Robinhood's sports contracts constitute unlawful gambling transactions. 

CFTC proposal could shift the legal fight 

The Robinhood case lands as federal regulators move toward a different framework for sports event contracts. 

The Commodity Futures Trading Commission (CFTC) released a 267-page proposed rulemaking on June 10 that would formally permit some sports-related prediction market contracts. The proposal would allow contracts tied to final scores, point spreads, win-loss results, tournament advancement, statistical performance, and season-long metrics. 

The agency would still draw limits. Contracts tied to a single play by a player or team would be barred. That would include individual pitches, shots, or fouls. The proposal also would prohibit contracts based on fights during games, injuries, officiating decisions, and pre-collegiate sports. 

The CFTC also said casino-style games based entirely on chance, such as roulette, would not qualify. Skill-influenced contests, including some poker tournaments, may be treated differently. Contracts involving terrorism, assassination, or war would remain barred because of national security concerns. 

The proposal comes while the CFTC has only one sitting commissioner, Chairman Michael Selig. Axios reported that Selig has been supportive of prediction markets and has described them as different from conventional sportsbooks. 

The American Gaming Association opposes that approach. It argues that prediction markets operate outside state and tribal gambling systems. The CFTC will accept public comments for 90 days before finalizing any rules.