Colorado Senate passes bill to remove promotional credit deductions

The Colorado Senate passed HB1311 by a 28-7 vote on Tuesday, which 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.

However, the version approved by the Senate differs slightly from the version the House passed. Thus, the bill will need to return to the House for concurrence before it can advance to Gov. Jared Polis for signature. Lawmakers will have to move very quickly as Colorado’s legislative session is scheduled to end May 7.

Gov. Jared Polis

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. Currently, the percentage is 2.25%, with it set to drop to 1.75% by FY2026- 2027. 

A previous iteration of the bill called for the requirement to go into effect on September 1. However, lawmakers have amended HB 1311 to go into effect July 1, 2026, giving one more year for operators to make deductions.

As reported, 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.

In November 2024, Colorado residents voted to no longer limit the amount of sports betting tax revenue the state can retain, eliminating the $29 million cap on sports betting tax revenue the state could retain.