Colorado Delays Ban on Sports Betting Promotional Tax

Colorado’s sports betting industry just dodged a major shake-up — for now. A legislative push to ban tax deductions on promotional bets is delayed after lawmakers failed to reach final agreement before the 2025 session closed.

House Bill 1311 (HB 1311) aimed to block sports betting operators from deducting free bets from taxable revenue. The Senate passed the bill with a 28-7 vote, but changes in the Senate version clashed with the House’s earlier draft. As the session ended on May 7, no consensus emerged, leaving the bill pending.

Despite the delay, the measure is poised to significantly boost Colorado’s sports betting tax revenue. Fiscal forecasts estimate an additional $12.9 million in state funds by 2026-27. This change, though unpopular with operators, would strengthen funding for state initiatives like water conservation.

When the legislature reconvenes, the House will review the Senate’s amendments. If approved, the bill heads to Governor Jared Polis for a signature.

Colorado’s Promo Bet Tax Ban Stalls: What It Means for Operators and the State

Key Points

• Bill HB 1311 Stalls in House: The House must review Senate changes after the session closed without agreement.
• Tax Revenue Expected to Soar: Estimates project $12.9 million in extra revenue by fiscal year 2026-27.
• Industry Reaction Split: Operators welcome the delay but warn the ban may weaken competitive offers.

Colorado’s Betting Promo Tax Battle: Delay, Debate, and What’s Next

Colorado’s push to reform sports betting taxes hit a speed bump as lawmakers adjourned without passing House Bill 1311. The bill, designed to ban deductions on promotional credits like free bets, passed the Senate but now awaits House review.

What HB 1311 Aims to Do

Currently, Colorado allows operators to deduct promotional credits from their taxable revenue. These credits — free bets or bonus offers — help attract players but shrink the tax base. The state taxes 10% of net betting proceeds, with promo deductions capped at 2.25% of total handle, set to drop to 1.75% by 2026-27.

HB 1311 proposes eliminating these deductions altogether, arguing they disproportionately reduce tax liability. The goal is to increase contributions to the Sports Betting Fund, which supports public programs like water conservation.

Senate Changes Spark Delay

The Senate approved HB 1311 but amended the start date to July 1, 2026 — nearly a year later than the original timeline. This extension, likely influenced by operator concerns, gives sportsbooks more time to adjust. However, the House didn’t have time to reconcile the amended version before the session ended, leaving the bill on hold.

Big Money at Stake

Fiscal projections highlight the bill’s importance. Even with the delay, Colorado expects an extra $3.2 million in fiscal year 2025-26. That figure jumps to $12.9 million in 2026-27 and $11.5 million in 2027-28 as the promo ban takes full effect.

The broader taxable base will likely strengthen the Sports Betting Fund, providing stable funding for essential state projects.

Industry Concerns

Not everyone is cheering. Operators argue that promotional credits are vital for player acquisition and retention, especially in a competitive market. Without these incentives, they warn, Colorado bettors may look elsewhere — possibly to offshore sites.

Still, lawmakers appear determined to close what they see as a loophole. Many believe removing promo deductions will level the playing field between operators and bolster public funding.

Colorado’s legislative standoff over HB 1311 has delayed — but not derailed — a pivotal gambling tax reform. While the betting industry welcomes the extra time, the state stands to gain millions once the ban on promotional deductions takes effect. As lawmakers prepare for the next session, the stakes remain high, and both sides will be watching closely. Expect this battle to shape the future of Colorado’s sports betting landscape in the years ahead.