Robinhood faces lawsuit over sports-event contracts
Trading platform Robinhood is facing a proposed class action lawsuit alleging that its prediction market offerings amount to illegal sports betting in several US states.
The complaint, filed by Georgia resident Matthew Mazza in a federal court in California, argues that Robinhood is offering sports event contracts as financial products when, in essence, they are sports gambling.
Mazza believes users of the platform were misled into believing they were participating in regulated financial investing. According to the suit, Mazza alleges that he lost US$400,000 in fees and commissions from wagering on sports-event contracts offered by Robinhood between 2025 and 2026.
“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,” the suit reads.
It’s another court case to add to the growing number of legal battles across the country involving prediction market platforms.
Prediction markets have been able to bypass state gambling laws by arguing that their financial products fall under the jurisdiction of the Commodity Futures Trading Commission. However, state regulatory bodies have argued that they are too close to sports gambling and need to be properly licensed and regulated to legally operate.
This week, the federal regulator sued New Mexico over an attempt to ban prediction markets in the state.
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2026/04/15: Montana sued by Kalshi for attempting to regulate event contracts
2025/03/25: Massachusetts investigates Robinhood’s March Madness event contracts
2026/01/13: AGA and IGA urge Congress to address sports event contracts
2026/01/13: Federal judge blocks Tennessee’s attempt to halt Kalshi sports event contracts
2026/04/15: Montana sued by Kalshi for attempting to regulate event contracts
2025/03/25: Massachusetts investigates Robinhood’s March Madness event contracts
2026/01/13: AGA and IGA urge Congress to address sports event contracts
2026/01/13: Federal judge blocks Tennessee’s attempt to halt Kalshi sports event contracts
The Backstory
Robinhood enters a widening legal fight
Robinhood’s proposed class action over sports-event contracts did not emerge in isolation. It is the latest pressure point in a fast-moving conflict over whether prediction markets are federally regulated financial products or sports betting offered without state gambling licenses.
The lawsuit, filed in federal court in California by Georgia resident Matthew Mazza, alleges Robinhood packaged sports-event contracts as investments even though they functioned as wagers. The complaint says Mazza lost US$400,000 in fees and commissions from transactions tied to sports outcomes between 2025 and 2026. A copy of the complaint frames the dispute as consumer harm arising from products that users allegedly were led to view as regulated trading rather than gambling.
The case puts Robinhood in the same regulatory crossfire as Kalshi, Crypto.com, Polymarket and other prediction-market operators. These platforms have argued that event contracts fall under the Commodity Exchange Act and the jurisdiction of the Commodity Futures Trading Commission. State gambling regulators have countered that sports-linked products are effectively wagers, regardless of how they are structured or labeled.
March Madness brought the issue to retail trading
Robinhood’s exposure intensified after it offered event contracts tied to March Madness through partner platform Kalshi. The college basketball tournament provided a high-profile test of how prediction-market products would be marketed to mainstream retail users, many of whom already knew Robinhood as a stock and options trading app rather than a gambling venue.
That launch drew scrutiny in Massachusetts, where Secretary of State Bill Galvin opened an inquiry into Robinhood’s sports prediction markets. The probe, first reported by Reuters, sought information on how many Massachusetts accounts were used to trade college sports event contracts. In Massachusetts’ investigation of Robinhood’s March Madness event contracts, Galvin’s office described the products as another effort to pull retail customers into speculative activity.
Robinhood’s defense has rested on the premise that the contracts are traded through a federally regulated framework and approved by the CFTC. That argument is central to the current lawsuit because it goes to how customers understood the products. If courts view the contracts as lawful derivatives, Robinhood’s posture is strengthened. If they view the same activity as unlicensed sports betting, plaintiffs and state regulators gain a clearer path to challenge both the products and the marketing around them.
Kalshi’s state-by-state litigation set the template
Kalshi has become the primary test case for the industry’s preemption argument. The company has repeatedly sued state officials after receiving cease-and-desist letters or facing regulatory warnings over sports-linked event contracts. Those cases have helped define the legal terrain now confronting Robinhood.
In Montana, Kalshi sued state officials after the attorney general’s office said its event contracts amounted to illegal gambling. The company argued that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over derivatives markets and blocks state officials from applying gambling laws to its products. The filing, described in Kalshi’s lawsuit against Montana regulators, distinguished event contracts from fixed-odds sports betting by emphasizing market pricing, counterparties and exchange-based trading.
Kalshi has made similar arguments elsewhere. In New York, the company sued the state gaming commission, saying state intervention improperly interfered with federally overseen prediction markets. The dispute, outlined in Kalshi’s challenge to New York event-contract rules, came as regulators in several states moved to classify sports event contracts as wagers requiring gambling licenses.
The company has had some early success. A federal judge temporarily blocked Tennessee from forcing Kalshi to halt sports-related contracts in the state, after the Tennessee Sports Wagering Council ordered Kalshi, Crypto.com and Polymarket to stop offering and void sports-linked contracts. The ruling in Tennessee’s attempt to halt Kalshi sports event contracts underscored the immediate practical stakes: whether states can cut off access while broader legal questions remain unresolved.
States see gambling; platforms see derivatives
The split between state regulators and prediction-market operators is partly technical and partly political. Platforms say users trade yes-or-no contracts whose prices move based on supply, demand and new information. They argue the exchange does not take the opposite side of the trade, unlike a sportsbook, and that federal commodities law provides a uniform national framework.
States focus on the underlying event. If a contract pays out based on whether a team wins a game, regulators argue the consumer experience is nearly indistinguishable from a sports bet. That position has been reinforced by the rapid expansion of sports markets beyond single-game outcomes into more complex structures, including products that resemble parlays.
The distinction matters because gambling law in the U.S. is built largely around state licensing, tax and consumer-protection regimes. Legal sportsbooks must win approval in each state, comply with advertising limits, use responsible-gaming tools and pay state taxes. If sports-event contracts can be offered nationwide as CFTC-regulated instruments, state officials say those safeguards could be bypassed.
For Robinhood, the risk is not limited to whether regulators can stop future offerings. The California lawsuit seeks to reframe past transactions as unlawful gambling activity and to recover alleged losses tied to fees and commissions. That expands the fight from institutional jurisdiction to retail-user liability, disclosure and restitution.
Gaming tribes and casinos push for Congress
The gaming industry has tried to move the debate beyond agency enforcement and into Congress. The American Gaming Association and Indian Gaming Association warned lawmakers that sports event contracts are “indistinguishable from legal sports betting” and said the products have grown because of regulatory inaction at the CFTC. Their appeal, described in the AGA and IGA letter urging Congress to address sports event contracts, argued that federal legislation is needed to stop gambling from being offered under the guise of event contracts.
Tribal operators have a distinct stake because state and tribal gaming compacts govern significant parts of the U.S. gambling market. If sports prediction markets operate outside those structures, tribes and licensed casinos could face competition from platforms that do not carry the same regulatory burdens or revenue-sharing obligations.
The congressional push also reflects frustration with uncertainty at the CFTC. Industry critics argue the agency has not drawn a clear line on sports contracts, while prediction markets say that hesitation supports their view that state gambling regulators cannot impose separate rules. The result has been litigation in multiple jurisdictions rather than a uniform national policy.
The stakes now extend beyond Kalshi
Robinhood’s role changes the scale of the dispute. Kalshi is a specialized prediction-market exchange. Robinhood is a mass-market brokerage app with a large base of retail customers, a history of attracting regulatory scrutiny and a brand associated with easy access to financial markets. Its involvement makes it harder to treat sports-event contracts as a niche derivatives issue.
The class action also gives courts a consumer-facing question that differs from many state enforcement cases. Judges are not only being asked who regulates the product. They may also be asked whether ordinary users were misled about the nature and legality of what they were doing. That could shape how platforms describe, promote and charge for event contracts even if federal preemption arguments survive.
Several outcomes are possible. Federal courts could continue to side with prediction markets on jurisdiction, limiting state efforts to block sports contracts. They could permit some state gambling enforcement to proceed, fragmenting the market. Congress could intervene, though timing and political appetite remain uncertain. Or the CFTC could take a more active role, clarifying which sports-event contracts are permitted and under what conditions.
Until then, Robinhood’s lawsuit places a central question before the courts: whether a product can be both a federally regulated contract and, in practical terms, a sports wager. The answer will affect not only Robinhood and its users but the boundary between financial trading and online gambling in the U.S.
