Rachel: I'm not trying to throw you under the bus............I just am uncertain why you would still let your daughters play over there, but not at your house (I would vote to stop playtime with her all-together).
Plan B: If your daughters still go over there. I would shoot straight with the grandmother. Tell it to her just like you told it to us. "I'm concerned about 9 yr old behavior; I don't allow that with my children. Grandma, what are your thoughts?"
Perhaps she sees what you see, and feels like she can't control or guide it either, since (assuming) the 9 yr old isn't there all that often.
Again, you might be surprised. She might be on your same page.