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In a bid to increase sports betting tax revenue, lawmakers in Colorado are pushing a new bill that would see the state collect taxes on the popular promotion known as free bets.
Rep. Julie McCluskie introduced HB 1311 to the Colorado House of Representatives in late March with Rep. Matt Soper and Sen. Dylan Roberts as sponsors. The proposal had its first hearing before the House Finance Committee yesterday (Apr 21) and was approved and advanced to the Committee on Appropriations.
Operators use these free bets to attract players to their websites, and if this bill is passed, these companies would have to include revenue gained from these free bets in their taxable income. The new revenue is being earmarked for the state’s water programs, with an estimated 30% increase in funding.
Proponents of the bill remain confident of its passing, with most arguing that this is a loophole that needs to be closed. Estimates also show that the state water projects could receive an extra $12m in the first year of the bill’s implementation, which will add to the $30m it already receives from sports betting tax revenue in the state.
Speaking on the bill, Sen Roberts stated, “The thought with this bill is that it’s time to make this change. It’s a great way to generate more funding.”
This comes as Colorado suffers from chronic drought and the effects of climate warming, which has seen a reduction in stream flows and demand from a growing population.
Colorado Taking a Different Approach
As multiple states look for ways to boost revenues from the growing gaming industry, Colorado lawmakers are adopting a unique strategy.
Following the legalization of sports betting in 2019, which was spurred by U.S. Supreme Court ruling, the state experienced a surge in tax revenue that initially surpassed expectations. However, as competition intensifies with more states entering the market, Colorado is now exploring new avenues through House Bill 1311 to sustain and grow its revenue stream.
While Colorado maintains a 10% tax rate on sports betting, other states like Illinois have enacted much higher rates, raising theirs from 15% to 40%. However, the Centennial State approach focuses on incremental reforms rather than drastic tax hikes.
Last year, voters approved the removal of a $29 million cap on sports betting tax revenues, allowing the states to be more flexible in collecting and allocating funds for local programs.
This new bill could also see a change to how operators acquire customers. Free bets and promotions have been essential marketing tools in the highly competitive Colorado market, but with these promos facing potential taxes, operators could be forced to rethink how aggressively they offer these incentives to players. This could lead few free-bets offers for Colorado sports bettors.
Source: Next.io
