The House Finance Committee in Colorado has approved a piece of legislation that proposes changes to how free bets offered by sports betting operators are taxed.
House Bill 1311 was passed by a 9-3 vote on Monday by the Finance Committee after being filed by Speaker of the House Julie McCluskie and Rep. Matt Soper. The bill, which has advanced to the Committee on Appropriations, is also backed by Sen. Dylan Roberts.
The measure proposes an amendment to Colorado Revised Statues regarding tax rules for sports betting operators. Since 2019, Colorado has levied a 10% tax rate on net sports betting proceeds with licensed operators allowed to deduct all payments to players, all federal excise taxes and a small percentage of free pets placed by players. Under HB 1311, an operator “shall not deduct any free bets placed by players” with the operator. The measure mandates operates to pay a tax on free bets generating additional revenue.
HB 1311 applies to free bets offered by both sports betting and online casino operators.
The three lawmakers have introduced the measure after Colorado residents voted in November to no longer limit the amount of sports betting tax revenue the state can retain.
Before the vote, Colorado could not retain more than $29 million in betting tax revenue. If enacted, the measure is projected to contribute $11.8 million in revenue in FY 2025-26.
Under HB 1311, the first 6% of betting revenue is to be deposited into the Wagering Recipients’ Hold Harmless Fund with the remaining revenue allocated toward the Water Plan Implementation Cash Fund, which supports water conservation.
If approved by the Colorado legislature, HB 1311 would go into effect Sept. 1.
Colorado to maintain current tax rate on sports betting
Lawmakers are proposing changes to how free bets are taxed as a way to generate additional revenue while not increasing the state’s tax rate on sports betting.
In 2023, Ohio doubled its tax rate on sports betting from 10% to 20% with Gov. Mike DeWine presenting a budget plan in February that considers an uptick from 20% to 40%.
Last year, Illinois Gov. J.B. Pritzker approved the state’s budget plan implementing a sports betting tax system that is based on a sliding scale. The sliding scale sees operators taxed based on their adjusted gross revenue with operators generating over $200 million in revenue taxed at a 40% rate. Operators that don’t meet that threshold are taxed at 20%.
New Jersey is also considering a tax increase on sports betting and iGaming to 25%. The state currently levies a 13% tax rate on sports betting and a 15% rate on iGaming.
