Colorado Looking to Tax Sportsbooks on Revenue from Free Bets

The Centennial State is looking to increase its tax revenue from sports betting in a unique way. 

The Colorado House is currently reviewing bill HB 1311, which would tax online sportsbooks on promotional bets. These include so-called “bonus bets”, which are often used to attract new bettors. Early projections show the change could increase tax revenue from the industry by around 30%.If passed, the bill would lead to sportsbooks offering fewer bonus bets

The bill is now in the House Committee on Appropriations after passing the Finance Committee.

Alternative to Tax Hike

Colorado has one of the lowest tax rates in the country for sports betting operators at 10%. That low rate has helped make it a popular market for sportsbooks, but now the state is looking for a larger share.

The hope is that sportsbooks will be more receptive to this change than a tax hike. Operators can offer fewer promotional bets if they wish to avoid the revenue loss, an option they wouldn’t have under a flat tax rate increase. With many states failing to raise their tax rates, Colorado lawmakers hope this strategy will prove more effective.

Will Bettors Speak Out?

While sportsbook operators may be willing to accept HB 1311, Colorado bettors could end up being the losers. That’s because sportsbooks would likely be more stingy with their promotional bets, meaning fewer chances for bettors to boost their bankroll without wagering their own money.

Opponents of the bill will likely target Colorado bettors directly, echoing the above message. That could lead to mounting public pressure on lawmakers, causing them to reject the bill as the 2026 midterm elections approach. This is the strategy that has killed proposed tax hikes across the country, and could spell doom for HB 1311.

Water Projects Driving Push for Tax Revenue Increase

Unlike many other US states, Colorado uses most of the tax revenue generated to fund water projects throughout the state. This includes everything from maintaining swimming beaches and lakes to securing water rights. 

Water is quickly becoming scarce in the American West, fueling the call for more funding towards Colorado’s water projects. Costs for legal battles over water rights continue to mount, with no end in sight. Combine that with the steady influx of people moving to the state, and you can see why lawmakers are seeking an increase in tax revenue.