Class Action Lawsuit Claims Robinhood Runs Illegal Sports Gambling Platform

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A proposed class action lawsuit claims that Robinhood, an investment and trading platform, is operating illegal online sports betting via its recently developed “prediction markets” hub.

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According to the 39-page lawsuit, Robinhood operates a prediction market platform where users can trade based on the outcome of a given event in sports, politics, economics or culture. The case claims that Robinhood’s sports event contracts are actually unlicensed sports betting in disguise and illegal under state gambling laws.

Per the suit, Robinhood markets itself as a platform that “democratizes” finance and gives users access to an “emerging asset class like event contracts.” The lawsuit alleges that the Robinhood prediction market’s sports event contracts are functionally identical to any other sports gambling operation because “users place bets on the outcome of events they do not control and [which] have no relationship to economic markets or events.”

The filing contends that Robinhood event contracts often closely resemble bets found on sports gambling platforms like DraftKings and FanDuel and have “odds and payouts that are nearly identical to the odds and payouts offered by traditional sportsbooks.”

Additionally, Robinhood’s event contracts are currently sourced directly from Kalshi, another prediction market that has come under similar scrutiny, the complaint explains.

As part of the partnership, the suit claims, Robinhood receives a share of Kalshi’s transaction fee, which is charged on all contract purchases, and earns interest on consumer funds with each purchase. According to the case, Robinhood also charges its own commission of one cent per event contract bought or sold on its hub and, depending on the exchange a contract is traded on, may charge an additional one-cent-per-contract exchange fee.

These fees quickly add up, the filing argues, especially considering that Robinhood reported over 12 billion event contracts being traded on its platform in 2025.

“[Robinhood] is, therefore, a ‘winner’ for all the same reasons and in all the same ways that Kalshi or a bookie is a ‘winner,’” the lawsuit says, alleging that the platform “secures winnings at the expense of individual gamblers.”

The case argues that Robinhood’s integration of a prediction markets hub into its platform is especially harmful to customers who use it for investment and financial brokerage purposes and who actively avoid gambling websites.

The suit says that Robinhood also allows users to put down their securities portfolios as collateral on event contract trades, which the case claims can quickly diminish equity in a user’s securities account given that event contracts are highly speculative and have no underlying collateral themselves.

Robinhood fails to inform users adequately of the risks of wagering their securities portfolios, which could include forced liquidation, substantial debt and the exposure of core investment holdings and long-term stock portfolios to significant losses, the filing alleges.

The Robinhood class action lawsuit seeks to represent anyone who lost money trading at least one sports event contract on the platform.

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