Colorado Governor Signs Bill Ending Free Bet Tax Deductions
Starting mid-next year, free bets will no longer be deductible from taxable sports betting revenue in Colorado.
LISTEN TO THIS ARTICLE:Governor Jared Polis has approved legislation that will further reduce and eliminate the value of free bets that sportsbook operators can deduct from taxable revenue.
The current tax structure for Colorado sportsbooks is 10% of sports betting revenue, with a 2.25% deduction permitted for promotional non-cash wagers.
However, House Bill 1311, signed into law by the governor on May 15, will reduce the allowable deduction for promotional credits by 1% starting January 1, 2026, and remove it fully by July 1, 2026.
The measure had already cleared the House and Senate earlier this year. In late April, it cleared its original chamber with a 52-13 vote and passed in the Senate by 28-7 on May 6.
According to the bill's sponsors, the legislation will generate approximately $13 million in additional revenue for the Water Plan Implementation Cash Fund in fiscal year 2026-27.
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Tax Cap Removed
This move is the latest step in Colorado's efforts to improve its sports betting revenue stream.
Last year, lawmakers decided to put the question of lifting the constitutional provision capping sports betting tax revenue at $29 million to a public vote after the state recorded $29.9 million in tax revenue.
The now-repealed law required that casinos and sports betting operators be reimbursed for tax revenue exceeding $29 million.
Voters approved removing the tax limit, and lawmakers projected a $2.5 million surplus for the 2025-26 fiscal year.
In the first quarter of 2025, Colorado's online sportsbooks generated over $143 million in gross gaming revenue. After accounting for promotional deductions and taxes, the adjusted revenue totaled $101.4 million.
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