Colorado Advances Bill to Cut Back on Sports Betting Write Offs

Colorado is preparing to change how sports betting operators handle deductions on their reported net proceeds. Lawmakers have now pushed forward a bill that would gradually remove certain tax write-offs currently available to sportsbooks.

Good to know

• Deductions for free bets would be completely removed starting July 2026.
• A temporary reduction period begins in mid-2025 before deductions are eliminated.
• The bill also allocates over $17,000 to the revenue department for implementation.

Colorado House Bill 1311 has cleared its third reading without any changes to its language. If the measure becomes law, it would change the way sports betting companies calculate their taxable proceeds, ending several existing deductions over the next two years.

The current system, in place since Colorado voters approved the 10% tax on net sports betting proceeds back in 2019, allows operators to subtract costs such as federal excise taxes and free bet promotions. At the moment, all free bets and player winnings can be deducted from gross revenue to calculate the final taxable amount.

However, under HB 1311, those benefits will start to wind down next year. The phase-out begins on July 1, 2025, with operators allowed to deduct only 2% of free bet amounts until the end of December. From January 1, 2026, to June 30, 2026, the deduction drops to 1%. After that, no free bet deductions would be permitted at all.

The main goal of the bill is to increase tax collections from sports betting activity. By limiting deductions, the state can expect more revenue to support public services.

One additional provision in HB 1311 covers administrative costs. It includes an appropriation of $17,135 to the Colorado Department of Revenue for personal services and IT system upgrades needed to enforce the new structure during the 2025–2026 fiscal year.

The move follows a national trend where some states are reviewing and tightening how much sportsbooks can write off, especially when it comes to promotions like free bets. States such as Virginia and Michigan have already made similar changes to improve tax revenue from the betting sector.

As of now, HB 1311 is still moving through the legislative process, but with no amendments made during its third reading, the current version is closer to finalization.