“A prediction market that offers sports event contracts is no different than a sports gambling book that lacks a license from any state gambling authority,” says the complaint filed in the US District Court for the Northern District of California.
The lawsuit is the latest salvo in a brewing fight over the delineation between sports betting and events contracts offered on prediction markets.
Polymarket, another prediction market operator, was hit with a similar consumer class action earlier this year. Both companies have also faced scrutiny from state gaming regulators looking to crack down on sports-related event contracts on prediction markets.
In the suit against Robinhood, consumers alleges the company is trying to “skirt around sports betting restrictions” by selling bets tied to the outcome of events, also known as event contracts, that aren’t regulated by state sports betting laws. “In reality, the sports event contracts Robinhood sells are ordinary, old-fashioned bets or wagers on the outcomes of sporting events.”
Events contracts are regulated by the Commodity Exchange Act and the Commodity Futures Trading Commission. Prediction market operators have increased lobbying to ensure they stay under the jurisdiction of the federal law rather than state-by-state gambling regulatory schemes.
Robinhood’s event contracts are federally regulated by the CFTC and offered through Robinhood Derivatives LLC, a CFTC-registered Futures Commission Merchant, which allows customers to access prediction markets safely, a spokesperson for the company said.
“Robinhood emphasizes informed participation across all products we offer, and our event contracts are supported by clear disclosures, transparent pricing, and educational resources designed to help customers understand how these markets work and any risks involved,” the spokesperson said, adding “We intend to defend ourselves against these meritless claims.”
The consumers allege that Robinhood created a misleading impression that prediction markets are approved by state gambling control authorities and are legal, when “they do not and are illegal under state law.”
People who are prone to gambling compulsions and avoid gambling websites maintain brokerage accounts with Robinhood and are exposed to gambling-related communications which can lead them to succumb to compulsive gambling, according to the complaint.
“Unlike traditional gambling sites that require cash deposits for gambling, Robinhood enables brokerage clients to gamble against margin on security positions, exposing customers to substantial losses on their portfolios,” the complaint says.
Robinhood’s marketing and user-interface doesn’t adequately communicate that customers might be using their securities portfolios as collateral to engage in event-contract trading, the complaint also says.
The consumers seek to represent a nationwide class of everyone who lost money trading on at least one sports event contract on Robinhood as well as an Ohio subclass. They bring claims under Ohio’s gambling statutes, multiple states’ gambling loss recovery statutes, and California’s Unfair Competition Law. They also bring a claim for unjust enrichment.
The complaint seeks damages, injunctive relief, attorneys’ fees, and costs.
The consumers are represented by Robbins Geller Rudman & Dowd LLP, Herman Jones LLP, and the Law Office of George W. Cochran.
The case is Austin v. Robinhood Markets Inc., N.D. Cal., No. 3:26-cv-05978, complaint filed 6/17/26.
Learn more about Bloomberg Law or Log In to keep reading:
See Breaking News in Context
Bloomberg Law provides trusted coverage of current events enhanced with legal analysis.
Already a subscriber?
Log in to keep reading or access research tools and resources.