Colorado House Advances Bill to Tax Sportsbooks on Free Bets

Colorful Colorado is taking a unique approach to increase their sports betting tax revenue.

The Colorado House Finance Committee has approved HB 1311, which would require Colorado sportsbooks to include revenue from free bets. It will now advance to the Committee on Appropriations, bringing it a step closer to a floor vote. If passed, the bill is projected to increase tax revenue from the industry by up to 30%.

Under Colorado’s current law, sportsbooks are not required to account for revenue from free bets when paying taxes. These are used to help sportsbooks attract new customers or to keep current ones happy. 

One of the driving reasons behind HB 1311 is the growing need for fresh water in the state. Unlike many other markets, Colorado uses the bulk of its sports betting tax revenue to support water projects, as the state’s water supply remains in danger thanks to droughts, climate change, and a fast-growing population. 

The proposed change is an alternative to a flat tax hike. Many other states have attempted to hike their rates, but failed under massive pressure from the industry. Colorado hopes this change will be easier for sportsbooks to accept.

Will Western Markets Follow Colorado’s Lead?

Colorado is one of four states that rely heavily on the Colorado River for freshwater. The states have been locked in legal battles over the rights to the water source, with the federal government constantly threatening to intervene. 

Only Colorado uses gambling funds to pay for water projects, though Arizona does so to a far smaller extent. If the tax revenue supporting those projects increases, so will the state’s war chest for the legal battle over water rights. That could inspire the three other states to take action.

Arizona has a regulated sports betting market and uses the revenue for its General Fund, which can include water projects.

California is also fighting for water rights, but it has not legalized sports betting. A bad relationship between the state, operators, and the tribes has stalled talks. While money may not be enough to sway the sides to work together, water might.