A bill to prevent Colorado sportsbooks from cutting their taxable revenue by using promotional betting credits has to wait. The state's legislative session is coming to a close, and the House will pause to continue reviewing changes the Senate made.
Key takeaways
- Colorado's HB1311 would stop sportsbooks from deducting free bets from taxable revenue totals.
- Senate revisions delayed the bill's rollout; no final House decision was made before adjournment.
- Projected tax gains could exceed $12 million annually, benefiting public programs like water conservation.
House Bill 1311 (HB1311), which bans operators from offsetting free bet promotions against their reported income, got the green light from the state Senate on May 6 in a 28-7 vote. However, since the Senate changed the proposal from the form the House initially passed, it returned it for reconsideration.
That evaluation never occurred promptly, since the General Assembly adjourned on May 7. Without a resolution by that deadline, the bill hangs in limbo, awaiting consideration when lawmakers reconvene.
HB1311's primary intent is to increase Colorado tax revenues by shutting what lawmakers regard as a loophole. Licensed sportsbooks can subtract promotional bets—generally awarded to new or returning customers—from taxable income.
The deduction is limited to a share of the aggregate bet: 2.25% in the current fiscal year, decreasing to 1.75% in the 2026–2027 fiscal year.
While Colorado has allowed this deduction since the state legalized sports betting, state authorities argue it significantly reduces the potential tax base. Legislators say closing the loophole gives a more accurate indication of real revenue and increases funding for state programs.
Senate seeks delay in tax increase launch
Arguably, the most substantial change the Senate bill made is delayed enforcement. Initially, the ban on deductions would have taken effect in Sept. 2025.
Under the amended proposal, the target date is July 2026, giving operators an additional full year to comply with existing deductions. The shift may reflect industry lobbying or concern about the economic shock from radical change.
Despite the postponed opening day, the state has yet to benefit financially. Budget estimates present a revenue gain of $3.2 million for the year 2025–2026 despite the delay. Profits are expected to be greater in the future: around $12.9 million in 2026–2027 and $11.5 million in 2027–2028.
These are allocated to the Sports Betting Fund, which finances public projects such as water conservation.
If the House finally passes the revised version, it will be sent to Gov. Jared Polis for his signature. All promotional bets will be subject to gross revenue calculation and taxes. Colorado follows states like Massachusetts and Ohio, which recently introduced tax hikes on sports betting operators, if signed into law.
