Sports Betting Tax Revenue
Background
Sports betting was legalized in Colorado after the passage of House Bill 19-1327 and voter approval of Proposition DD during the November 2019 Election.1 Sports betting began in May 2020, both onsite at casinos in Colorado's three gaming towns and online through licensed operators. As voter-approved state revenue, sports betting revenue is not subject to the TABOR limit except for licensing fees, operation fees, and other charges for services.
Tax Rate
Sports betting is taxed at a rate of 10 percent on casinos' net sports betting proceeds. Net sports betting proceeds are defined as the amount of bets less payments to players, free bets, and federal excise taxes.2
Exemptions
Prior to the passage of House Bill 22-1402, sports betting operators could retain all of their net sports betting proceeds from free bets. HB 22-14023 modified the allowable portion of free bets that may be deducted from net sports betting proceeds as follows:
- Up to 2.5 percent of the total amount of all bets, from January 1, 2023 through June 30, 2024;
- Up to 2.25 percent of the total amount of all bets, in FY 2024-25;
- Up to 2.0 percent of the total amount of all bets, in FY 2025-26; and
- Up to 1.75 percent of the total amount of bets, beginning in FY 2026 27.
Distribution
Sports betting revenue is distributed to pay for the following in the order listed below:4
- all administrative costs incurred by the Department of Revenue's Division of Gaming first;
- 6 percent to a hold harmless fund to reimburse recipients of current casino gaming tax revenue for any potential loss in revenue due to the legalization of sports betting;
- $130,000 for counseling services and a gambling crisis hotline in the Office of Behavioral Health in the Department of Human Services for gambling addiction problems until December 31, 2023; and
- the remaining amount to the Water Plan Implementation Cash Fund to fund water projects under the State Water Plan.
State Comparisons
After the United States Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA) in 2018, some states began to legalize sports betting. Sports betting is legal and operational in Washington D.C. and 38 states including Colorado as of March 2024, according to the National Conference of State Legislatures (NCSL). Online sports betting is legal in 27 states, including Colorado.
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