Colorado’s latest attempt to remove deductions from promotional credits for sports betting operators seems unsuccessful, or at least for now. The issue remains unresolved, as the state’s 2025 legislative session concluded.
On Tuesday, May 6, 2025, House Bill 1311 was passed by the Senate in a 28 to 7 vote. The legislation would change Colorado’s Revised Statutes, and it would ban permitted sports betting operators from taking away free bets from their taxable earnings.
Senate Approves Amended Version
However, the Senate passed an amended version of the HB1311 legislation, making it different from the variant which was previously approved by the House.
Considering the recent events, the sports wagering tax bill is now heading back to the House for review. However, the legislative session was disbanded on May 7, 2025, and no final agreement was reached before the deadline.
It means that for now, the bill remains under review, as the House must assess and review the Senate’s latest changes.
Trying to Close a Legal Loohole
House Bill 1311 is sponsored by Representative Marc Catlin and Representative Julie McCluskie in the House and Senator Dylan Roberts and Senator Cleave Simpson in the Senate.
The bill was introduced as a way to increase revenue for the state by closing a legal loophole that allows operators to decrease their taxable income by offering promotional credits to their players.
Betting Operators Could Face Significant Tax Changes
As of May 2025, Colorado’s mobile sports betting market operates with 13 active online sports betting platforms. Some of them include well-known brands like Bally Bet, bet365, BetMGM, FanDuel, Caesars, and more.
Colorado’s current mobile sports betting market implements a 10% tax on net revenue from sports wagers. However, operators can deduct promotional credits, also known as free bets, up to a certain percentage of the total betting handle.
Presently, the said cap is at 2.25% for the fiscal year, and it’s on track to drop to 1.75% by the 2026-2027 fiscal year. The state’s promotional credit deduction has been a thing since the legalisation of mobile sports betting. However, local officials have highlighted that it can harm tax revenue.
Senate Changes Push the Date Forward
One of the amendments in the bill made by the Senate is the date on which the ban will go into effect, and ban the deductions on promotional credits.
The initial version of the legislation had a starting date of September 1, 2025. However, the Senate’s amended variant would see the date move to July 1, 2026. With the extension, private operators will have extra time to utilise these promo deductions and prepare for the change.
More Tax Revenue for Colorado
The removal of the deductions from promotional credits may be bad news for operators, but it would be a welcome and prolific change for Centennial State.
Calculations suggest that the ban on promotional deductions is on track to boost the funds to the state’s Sports Betting Fund by around US$3.2 million for the fiscal year 2025-2026, despite the proposed delay on enactment.
The positive effect of the change would be more substantial in the following years, with projections pointing to extra revenue for the state. These predicted numbers are US$12.9 million in 2026-2027 and US$11.5 million in 2027-2028.
Predictably, the increase in tax revenue for the state would come from the broader taxable base, which would be possible after the removal of the promotional deductions.
Operators often rely on free bets to attract and retain consumers. However, the state believes that these promotional credits decrease the tax liability, and the numbers are different from the actual wagered money.
With the shutdown of the legal loophole, Colorado legislators are looking to stabilise and increase funding for public use, including water conservation, along with other state initiatives that rely on support from the Sports Betting Fund.
What’s to Come?
If the House accepts the Senate’s rendition of the sports betting legislation when the legislature assembles, the bill will be sent to Gov. Jared Polis. At the governor’s desk, the bill will be up for a final review and ultimately a blessing.
Provided HB1311 goes all the way and is enacted into law, the legislation will direct that no promotional bets placed by bettors can be subtracted from operators’ gross gaming revenue. Hence, making sure that the full value of a wager is subject to taxation.
Operators Respond to the Changes
Like most major sports betting changes, the removal of promotional bets deduction has also seen mixed reactions from private sector operators. Some of the betting platforms are thankful for the transition period, while others believe the removal of promo deduction could lead to a decrease in competitive incentives for users, particularly in a jurisdiction where promotional offers are an essential factor.
However, despite the disagreement from some of the third-party operators, it looks like HB1311 has more than enough momentum in the legislature to pass the bill. Still, there are a few minor obstacles on its way.
Colorado Reaps the Fruits of Sports Betting
In the meantime, Colorado is one of the 38 U.S. states that reaps the success of mobile sports betting. For the whole of 2024, the state recorded a betting volume of US$6.18 billion, which was an impressive 11.3% increase from the US$5.56 billion handle in 2023.
The bump in wagering volume also means higher gross gaming revenue for the year. According to the state, earnings hit US$475.1 million, which was more than the US$391.9 million in 2023. This translated to US$31.9 million in tax revenue for 2024.
