Colorado water projects will soon see more funding from sports betting.
This week, the Senate passed House Bill 1311, 28-7, to prohibit Colorado sports betting operators from deducting free bets from taxable sports betting revenue. The Senate added an amendment that required a House concurrence vote.
The House concurred with the Senate version before the session adjourned Wednesday.
Colorado sports betting bill details
Colorado voters approved sports betting in 2019, with much of the revenue going toward water projects in the state. The law created a 10% tax on sports betting revenue and allowed unlimited deductions for promotional spending.
Those unlimited deductions were pulled back in 2022, with a new bill limiting those deductions to a percentage of handle with the maximum deduction dropping through July 2026.
Under that law, sportsbook operators were allowed to deduct a certain percentage of promos handed out to bettors based on their monthly handle. The percentages were stepped down over the next few years:
- From July 1, 2025, to June 30, 2026, no more than 2% of monthly handle
- On and after July 1, 2026, no more than 1.75% of monthly handle
New model
In the bill passed this week, the step-down is altered.
The new model alters the existing framework:
- Between July 1, 2025, and Dec. 31, 2025, no more than 2% of handle
- Between Jan. 1, 2026, and June 30, 2026, no more than 1% of handle
- Beginning July 1, 2026, all promotional deductions will end
Colorado sports betting financials
The bill requires an appropriation of $17,135 to the Department of Revenue for personal services and tax administration IT system support.
The legislation’s fiscal note estimates the changes will bring an extra $12.9 million to the Sports Betting Fund in fiscal year 2026-27.
In the initial law, the fiscal note estimated the fund would see $39.1 million in fiscal year 2026-27. In terms of the new model, the fund could see an estimated $52 million.
Change coming since tax cap removed
The initial law placed a tax revenue cap of $29 million for the state. That is because of a 1992 state constitutional amendment that limited tax collection to legislative projections.
In the last fiscal year, the tax revenue crept over the $29 million mark. The legislature referred an amendment to November’s ballot.
Voters removed the cap at the ballot box.
Colorado sportsbook tax history
Since sportsbooks launched in 2020, they have contributed $79 million in tax revenue.
The first full year of action, they paid $6.6 million in taxes.
That jumped to $29.9 million for fiscal 2024 with the first round of promotional deduction changes.
