Polis Signs off On New Regulations for Colorado Sportsbooks

Some big changes are coming to Colorado’s sports betting market.

Governor Jared Polis has signed off on SB 131, which adds new regulations to help protect bettors. The bipartisan legislation previously included a full ban on prop bets and other drastic changes, but most were removed due to concerns about their impact on tax revenue. A fiscal note is included with the bill, projecting a drop of around $700,000 in annual tax revenue from the industry.

The new regulations will be the first major reform Colorado’s mobile sports betting market has seen since launching in 2019.

The Three Biggest Changes Coming for Colorado

While SB 131 was stripped of its most significant proposals, its passage will still bring three major changes to Colorado.

The first is a ban on credit card deposits, forcing those bettors to fund their accounts through another payment method. While many major sportsbooks don’t accept those deposits, the ban will ensure that all operators follow suit.

The second change coming to Colorado will be restrictions on sportsbooks' push notifications. Operators will no longer be able to entice customers to place wagers using this method, which can be dangerous for customers struggling with problem gambling.

The final and most significant change from SB 131 will limit bettors to six deposits in a 24-hour period. The goal is to force bettors chasing losses to step away and cool off. This timeout can help them feel the financial impact of their losses and prevent them from losing even more.

Ad Restrictions, Prop Bet Ban Fail

When SB 131 was originally one of the most aggressive crackdowns proposed in the US. However, concerns over the financial impact led to the bill’s two most significant proposals being stripped early in the legislative process.

One of the boldest proposals was a full ban on prop bets. While these bets have been linked to problem gambling and spot-fixing, they also account for a large share of sportsbooks' revenue. Bettors love the alternative betting options prop bets provide, and often use them when building parlays.

The other aggressive proposal to be stripped would have restricted when sportsbooks can advertise. They would be banned from running ads during the day and primetime hours, protecting bettors and underage residents from the temptation to place wagers.

A Tale of Two Colorado Crises

The new regulations from SB 131 are making headlines, but the bigger story remains buried. 

In addition to adding protection for bettors, the bill will also require Colorado to meet or exceed the tax revenue sent to the State Water Plan year over year. The importance of growing the state’s freshwater was highlighted by both parties amid historic drought conditions, leading them to add the requirement.

However, the requirement will also limit the state’s ability to fight problem gambling, forcing it to avoid any significant hit to tax revenue. This was why the prop bet ban and advertising restrictions were stripped from SB 131, and makes it unlikely we’ll see either proposal reappear anytime soon.

The small fraction of revenue not sent to fund water projects is used to support problem gambling programs and resources. Unfortunately, these funds would be the first to be rerouted to the State Water Plan if Colorado’s sports betting tax revenue declines annually.

Colorado lawmakers passed SB 131 to add protections for bettors, but their decision to link it to another crisis could have the opposite effect over the coming years.