The lawsuit, filed in the Southern District of New York, claims that Robinhood's actions rigged the market against its customers.
"Robinhood's actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood's customers," the lawsuit states.
Robinhood did not respond to a request for comment. The company imposed the stock-trading restrictions Thursday citing "recent volatility." The company said in a blog post it will only allow users to close out their positions in those stocks, which include GameStop (GME), AMC (AMC), Bed Bath & Beyond (BBBY), and Nokia (NOK).
Following the decision Thursday, shares of GameStop fluctuated wildly.
The lawsuit claims Robinhood's decision deprived retail investors of potential gains they could have made by buying when the stock was low and selling when its price rose.
GameStop's stock has soared since January 11 after it hired several new board members that investors believed could help the stock boost its digital sales. Reddit's WallStreetBets group began promoting the stock, sending it soaring more than 1,000% over the past several weeks.
The stock's surge forced short-sellers who were betting against the stock to buy shares to hedge their positions, sending the stock soaring even higher.
Many day traders took advantage of Robinhood's free trades, placing bets on GameStop and other stocks the Reddit group promoted. But those customers are playing a dangerous game. The companies' fundamentals don't support such elevated stock prices, and the bubble could burst, wiping out the traders who had placed big bets on GameStop and the like.
"We're committed to helping our customers navigate this uncertainty," the company said in a statement. "We fundamentally believe that everyone should have access to financial markets."
Robinhood published another blog post Thursday afternoon saying it would "allow limited buys of these" stocks starting Friday.
Redditors band together
Following Robinhood's decision earlier Thursday morning, Redditors stood up a new forum, r/ClassActionRobinHood, to coordinate efforts for a lawsuit. It collected more than 31,000 users Thursday.
One law firm that Redditors have engaged with is ChapmanAlbin LLC, based in Cleveland, Ohio, which specializes in investments and financial fraud. The firm's homepage currently has a prompt titled, "Are you a Robinhood user who has suffered losses?" along with a way for people to submit information.
The firm has collected information from more than 6,000 people as it investigates Robinhood, attorney Philip Vujanov told CNN.
"This is pretty unprecedented, I've never heard of another scenario like this," Vujanov told CNN in a phone interview. "There's going to be a lot of people left holding the bag."
Vujanov specifically called Robinhood's actions today "disingenuous" while citing a tweet from Robinhood's official Twitter account in March 2016 that stated, "Let the people trade."
"Now, all of a sudden, they are changing their position," Vujanov said regarding Robinhood.
One avid Wallstreetbets user dismayed over Robinhood's decision was Christopher Kardatzke, 21, a recent college graduate who, along with his brother, have developed free financial software used by Redditors to guide their investment strategy.
"It seems a bit silly. The people of r/wallstreetbets were buying up GameStop and playing a game of Jenga, but it's the same game that hedge funds have been playing for decades and decades," Kardatzke said. "It's a bit ridiculous."
This sentiment was echoed on Capitol Hill where Democratic Rep. Alexandria Ocasio-Cortez and Republican Sen. Ted Cruz were among a group of lawmakers to chastise Robinhood's decision.
"We now need to know more about @RobinhoodApp's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit," tweeted Ocasio-Cortez.
In a subsequent tweet, Ocasio-Cortez said she will be on Twitch tonight to discuss GameStop and today's developments.
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