Colorado Bill Would Eliminate Tax Breaks on Free Sports Bets

Posted on: April 22, 2025, 10:33h. 

Last updated on: April 23, 2025, 09:48h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.
  • Bill aims to close loophole allowing for free bets to be deducted from taxes
  • If approved, it would direct more revenue to the state’s water cash fund

In an effort to bolster the state’s water fund, Colorado lawmakers proposed a bill that would end the tax deduction sportsbook operators take from free bets offered to clients.

Deion Sanders Colorado Coach Prime
University of Colorado head coach Deion Sanders. A politician in the state is proposing ending tax deductions for gaming companies on free sports bets. (Image: AP)

Introduced by State Sen. Dylan Roberts (D), House Bill 1311 (HB25-1311) proposes taxing the free bets offered by sportsbooks, which are typically used as a customer acquisition and retention tool. Many states allow for those wagers and promotional spending to be deducted from net sports betting proceeds.

Under current law, for the purpose of calculating its net sports betting proceeds, a sports betting operator or internet sports betting operator is allowed to deduct all payments to players, all federal excise taxes paid, and a certain percentage of free bets placed by players,” according to a summary of the bill.

If approved, Roberts’ legislation, which has multiple co-sponsors in the Colorado House of Representatives, would halt that deduction starting Sept. 1, 2025.

There’s Precedent for Colorado Tax Bill

Mobile sports betting commenced in Colorado nearly five years ago. Voters there approved that form of wagering after it was marketed as a revenue-generating avenue for the state’s Water Plan Implementation Cash Fund.

Since its inception, Colorado has become one of the fastest-growing sports betting markets in the country, meaning there have been tax benefits for the water fund. However, the state’s population is growing rapidly. Combine that growth with climate change and some politicians there are looking for new ways to boost water revenue.

While HB25-1311 is hot off the presses, it could find momentum because it could add another $12 million per year to the $30 million annual haul the water fund receives from sports betting. Roberts believes his legislation is integral for water conversation plans, acquisition of water rights, and refreshing the state’s irrigation systems.

Importantly, there’s precedent for this type of legislation in the state. In 2023, Colorado implemented limitations on the number of free wagers sportsbook operators could offer, but the state has yet to outright levy free bets.

Why Roberts Bill Could Pass

HB25-1311 arrives at a time of growing state-level momentum to increase sports wagering taxes with such moves seen in blue, purple, and red political states. Some market observers note that the successful sports betting levy hikes were led by governors, indicating if Gov. Jared Polis (D) gets on board, Roberts’ bill could gain a tailwind.

As things stand today, there could be bipartisan impetus to advance the bill simply because water conservation and rights are a marquee issue in Colorado.

From the industry’s perspective, if the legislation is signed into law, it would mean an increased tax liability, but Colorado’s 10% tax on net gaming proceeds, which wouldn’t be increased, is one of the most favorable rates in the country.