Colorado’s Tax Benefit from Regulating Online Casino

Colorado is the first state to phase out tax deductions for promotions for sports betting providers. Since CO sports betting debuted in 2020, the state first permitted operators to write off the expense of bonuses. The combination of such provision and a 10% tax rate has produced little tax receipts.

At any of the more than 30 casinos in the state, whether they are in Black Hawk, Central City, or Cripple Creek, or at casinos run by tribes like Ignacio and Towaoc. All but a few have a vast selection of slot machines, table games, and poker rooms. Several Colorado sports betting websites and applications, such as BetRivers, BetMGM, FanDuel, and DraftKings, also accept sports bets but online gambling is yet to be allowed.

The Tax Benefit Analysis

According to the American Gaming Association, Colorado’s gambling income exceeded $1.23 billion in 2021, the state’s most excellent single-year total and the 14th highest of all states with commercial gaming.

The area ranked as the 15th largest commercial gaming market in the United States last year, finishing $100 million ahead of downtown Las Vegas, thanks to the combined $812 million earned by Black Hawk and Central City casinos.

For the first half of 2022, Colorado’s gaming income was $646 million through June, an increase of 15.1%. Proposition DD, which authorized retail and online sportsbooks and channeled the tax money toward state-wide water-related projects and commitments, was narrowly adopted by Colorado voters in November 2019.

Through June 2020, more than $7.6 billion has been gambled on sports since the market opened, with operators earning $464,9 million. Colorado is an online monopoly, with over 98 percent of all bets being placed through mobile apps. The laws permit Colorado casinos to get into agreements with various bookmakers. There were 44 physical and online sportsbooks in June.

Online slot income in New Jersey increased 27.8% year over year to $134.6 million in April, but internet poker revenue decreased 6.3% to $2.3 million. Overall, online gambling revenue in the state increased by 27.0% to $136.9 million.

Since Colorado has a population of 5,922,618 compared to New Jersey’s 9,388,414 people, we can anticipate that 2/3 of NJ’s tax revenue from online casino regulation will come from Colorado.

The Colorado Sports Betting Bill Is Designed To Reduce Sportsbooks’ Free Play Write-Offs

Sportsbooks’ ability to deduct free play credits for tax purposes would be limited under Colorado House Bill 22-1402. Free play is a common incentive used by sportsbook operators to lure clients to sign up. Although the bets that players place using free play credit are recorded in handling, certain states permit operators to subtract them from their taxable revenue.

Colorado policymakers are looking at free play as a method to boost tax income as the sports betting market matures. Reducing free credit write-offs may result in fewer and smaller sportsbook bonuses used by sportsbooks to draw in new clients. Numerous industry watchers think that since big prizes erode potential revenues, bookmakers will eventually have to stop depending on them.

3.6% of the sportsbook handle, according to the fiscal note for HB 22-1402, is attributable to site credits. Currently, sportsbooks can deduct all of those promotional credits, which lowers the amount of tax they must pay. Upon becoming a law, Gov.

As the growth of the sportsbook handle slows, reducing free play write-offs would boost tax revenue for the state. The fiscal note projects an increase in tax collections of $2.6 million in FY 2022–23 and $6 million in FY 2023–24. That extra cash will be allocated to Colorado’s water implementation fund and the hold harmless fund.

HB 22-1402 allocates at least $2.5 million annually for a new problem gambling award program, beginning in FY 2022-2023. The $130,000 allotted for problem gambling programs is 18 times as much. The Limited Gaming Fund would provide this funding. All additional gaming income, including license fees and casino taxes, is deposited into this fund.

Colorado has legalized pari-mutuel betting, daily fantasy sports, and online sports betting. State lawmakers legalized daily fantasy sports in 2016, and a sports betting statute was introduced in 2019 and ratified by state voters in a referendum in November. The measure permits Colorado residents to gamble on sports both in-person and online.

Online casino gaming is not permitted in Colorado by law. Many social casinos offer online casino games that state bettors can play for fun or prizes. Colorado has a lottery. However, internet lottery sales are not permitted there.

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