Colorado Advances House Bill 1311 to Cut Betting Tax Breaks

Colorado lawmakers are moving to change how sports betting and online casino operators report taxable revenue. House Bill 1311 aims to close a tax break that currently allows companies to deduct free bets and promotional offers when calculating taxes owed.

Good to know

• Colorado may remove the free bet tax deduction for sports betting and online casinos.
• Operators would be taxed on full revenue, including promotional wagers.
• The change could generate $11.8 million more for the state in the 2025–26 fiscal year.

The proposal received a 9–3 vote of approval from the House Finance Committee and is now set for review by the Committee on Appropriations. If passed, the measure would require betting companies to include all revenue—free bets included—when paying the state’s 10 percent tax.

Since legal sports betting launched in Colorado in 2019, operators have been allowed to deduct payouts, federal excise taxes, and a portion of free bet costs from their taxable income. HB 1311 would eliminate that deduction, impacting both retail sportsbooks and online casinos.

Boosting Revenue Without Raising Tax Rate

Supporters say the bill offers a way to grow tax revenue from sports betting without increasing the actual tax rate. House Speaker Julie McCluskie, Rep. Matt Soper, and Sen. Dylan Roberts are leading the charge, pointing to the bill’s potential to support key state programs.

Last year, Colorado voters approved removing the $29 million annual cap on tax revenue collected from sports betting. That change opened the door for lawmakers to adjust how revenue is calculated—without changing the 10 percent rate operators already pay.

If HB 1311 becomes law, it would go into effect on September 1. Projections suggest the measure could generate an additional $11.8 million in the 2025–26 fiscal year. According to the proposed plan, 6 percent of that extra revenue would go to the Wagering Recipients’ Hold Harmless Fund, with the remainder allocated to the Water Plan Implementation Cash Fund, which funds statewide water conservation and management efforts.

For betting companies, the proposed change means losing a widely used tool for player acquisition. Free bets are a common strategy for drawing in new customers, but if they are no longer deductible, operators may need to rethink their promotional tactics.

Lawmakers believe the measure will make the market more financially beneficial for the state, especially as betting continues to grow. Meanwhile, operators are likely to watch the bill’s progress closely, as it directly affects their bottom line.