Both the Colorado Senate and the House have approved versions of a bill that will sunset promotional credit deductions from state sports operators.
The Colorado Senate passed HB1311 by a 28-7 vote on Tuesday. The measure amends the state’s Revised Statutes to require licensed online casino and sports betting operators to pay a tax on free bets to generate additional revenue.
The version approved by the Senate differs slightly from the version the House passed, so it will need to return to the House for concurrence before it can advance to Gov. Jared Polis for signature.
Bill eliminates promo cred deductions starting July 2026
HB 1311 mandates that a licensed operator “shall not deduct any free bets placed by players.” Active law in Colorado levies a 10% tax rate on net sports betting proceeds with operators allowed to deduct free bets up to a certain percentage of handle. Lawmakers first capped the amount of promotional credit deductions in 2024.
Right now, the percentage is 2.25%, with it set to drop to 1.75% by FY2026-2027. While it seems small, it can have a huge impact on the taxable revenue operators produce each month.
For example, in March, Colorado sportsbooks produced $36.2 million in gross gaming revenue, but taxable revenue amounted to only $21.9 million thanks to more than $14 million in promotional credit deductions.
A previous iteration of the bill called for the requirement to go into effect Sept. 1. Lawmakers have amended HB 1311 to go into effect July 1, 2026, giving one more year for operators to make deductions.
According to the bill’s fiscal note, the measure is expected to increase revenue to the state’s Sports Betting Fund by approximately $3.2 million in FY2025-26. Revenue in FY2026-27 is expected to jump by $12.9 million and $11.5 million in FY2027-28.
The Department of Revenue will use the tax revenue to support the state’s tax administration IT system, the executive director’s office and the taxation business group.
A portion of sports betting tax revenue is also deposited into the Wagering Recipients’ Hold Harmless Fund with another portion of revenue allocated toward the Water Plan Implementation Cash Fund, which supports water conservation across Colorado.
HB 1311 will now head to the House for further consideration. Lawmakers will have to move very quickly as Colorado’s legislative session is scheduled to end May 7.
Colorado residents vote on tax limits
Colorado is considering changes to its tax rules on free wagers after a key vote in 2024.
Last November, residents and visitors in the Centennial State voted to no longer limit the amount of sports betting tax revenue the state can retain. Before voters hit the poll, Colorado could not retain more than $29 million in tax revenue from gambling. By approving the removal of the cap, the voters set the stage for a measure like HB1311 to pass.
