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Read Full BioIn a bid to bolster gambling state revenues without raising current tax rates, Colorado legislators have just advanced House Bill 1311, targeting free promotional bets previously excluded from taxable revenue.
The bill, passed by a 9-3 majority vote in the House Finance Committee earlier this week, marks a substantial realignment of the state’s existing sports betting tax framework.
Initially filed by Speaker of the House Julie McCluskie and Representative Matt Soper, Bill 1311 also received the backing of Senator Dylan Roberts. The filing is set to increase Colorado’s sports betting tax revenues without raising the current 10% rate on net betting proceeds.
The move was prompted by legislators who want to tackle the legal loophole being exploited by operators in Colorado, which allows them to deduct free bets from their present-day tax obligations.
Free Bets Face New Tax Liabilities Under Proposed Colorado Law
Under the current law, licensed sports betting and igaming casino operators can deduct player payouts, federal excise taxes, and promotional bets from their taxable revenue. Should HB 1311 become law, the latter could soon be impermissible, mandating free wagers become liable as taxable income as early as September 1, 2025.
If enacted, experts project that the bill could generate around $11.8 million in additional tax revenue in fiscal year 2025–26 alone. In doing so, lawmakers have outlined a specific allocation formula for the Centennial State’s water conservation efforts.
Per the suggested legislation, 6% of the new revenue will be directed into the Wagering Recipients’ Hold Harmless Fund. The remaining 94% will go to the Water Plan Implementation Cash Fund, which channels resources into state-level water infrastructure, conservation programs, and long-term drought planning initiatives.
Supporters Say the Bill Creates Fairness, Critics Warn of Market Impact
The bill’s backers maintain that the untapped promotional free bet exemption equates to a sizable proportion of the state’s sports wagering revenue economy. In its current state, they argue it deprives Colorado of the full entitlement of its gambling tax proceeds, which they also contend will create a more equitable and sustainable system.
Conversely, critics from the gaming sector are already pushing back, stating that rescinding these existing tax exemptions will reduce future promotional activity.
A plausible knock-on effect could begin to see a limit to the number of available customer acquisition and retention campaigns, which they claim is the catalyst driving the industry’s growth.
Having cleared Colorado’s House Finance Committee earlier this week, the Committee on Appropriations will now review the free bet bill in its entirety. Here, the fiscal implications of the bill will be surveyed, which, should it continue to advance, would mean it could reach a full vote in the Colorado legislature before the end of the current session next month.
Following that, as long as no opposing referendum challenge is filed, HB 1311 could take effect as early as September 2025. However, if contested, it would likely appear on the 2026 general election ballot, which could delay its implementation until Coloradans have had their say.
