New Colorado Sports Betting Bill Set To Reduce Free Play Write-Offs For Sportsbooks

GamingToday.com is an independent sports news and information service. GamingToday.com has partnerships with some of the top legal and licensed sportsbook companies in the US. When you claim a bonus offer or promotion through a link on this site, Gaming Today may receive referral compensation from the sportsbook company. Although the relationships we have with sportsbook companies may influence the order in which we place companies on the site, all reviews, recommendations, and opinions are wholly our own. They are the recommendations from our authors and contributors who are avid sports fans themselves.

For more information, please read How We Rank Sportsbooks, Privacy Policy, or Contact Us with any concerns you may have.

Gaming Today is licensed and regulated to operate in AZ, CO, CT, IN, KS, LA, MI, NJ, NY, PA, TN, and VA.

A new Colorado House bill, HB 22-1402, would reduce the amount of free play credits sportsbooks could write off for tax purposes.  Sportsbook operators often offer free play to entice customers to sign up. While the wagers bettors make with free play credit are accounted for in handle, some states allow operators to deduct them from their taxable revenue.

Colorado lawmakers are eying free play as a way to increase sports betting tax revenue as the industry reaches maturity. Reducing free credit write-offs could reduce the number and size of sportsbook bonuses, which sportsbooks use to attract new customers. Many industry observers believe sportsbooks will eventually have to stop relying on large bonuses over time anyway, as they are eating into potential profits.

A Boost To Problem Gambling Programs 

HB 22-1402’s fiscal note estimates that 3.6% of sportsbook handle comes from site credits. Currently, sportsbooks can write all of those promotional credits off, reducing the tax they have to pay. Once signed into law by Gov. Jared Polis, HB 22-1402 would decrease the amount of free play credits sportsbooks are allowed to write off following this schedule: 

Date Range Maximum Promotional Credits Eligible for Write-Offs as Percentage of Handle
January 2023-June 20242.5%
Fiscal Year 2024-252.25%
Fiscal Year 2025-262.0%
After July 2026 1.75%
  

Reducing free play write-offs would increase tax revenue for the state as sportsbook handle growth slows. The fiscal note estimates a $2.6 million increase in tax revenue in FY 2022-23 and a $6 million increase in tax revenue in FY 2023-24. That’s extra money that will go to the hold harmless fund and Colorado’s water implementation fund.  

Starting in FY 2022-23, HB 22-1402 dedicates at least $2.5 million per year to a new problem gambling grant program. That’s 18 times more than the $130,000 currently allocated to problem gambling programs. This money would come from the Limited Gaming Fund. This fund is where all the other gaming revenue goes, from license fees to casino taxes. 

Other Attempts To Tap Into Free Play Credits 

There is similar movement in Louisiana, where SB 290 was enrolled on May 26. This bill would cap the promotional credits eligible for tax write-offs at $5 million per operator per year, closing a loophole sportsbook operators have been taking advantage of. The last step before that bill becomes law is the governor’s signature.

Ohio also hopes to tap into the free play credits written off by its gambling companies. Ohio’s sports betting bill legalizes sports betting, but also eliminates the tax exemption for Ohio casino promotional credits. That bill’s fiscal note found that promotional credits at casinos “regularly exceeded $100 million annually.” At a 33% tax rate, that extra taxable revenue is an attractive target for Ohio lawmakers seeking new revenue. 

Colorado, Louisiana, and Ohio rethinking their approaches to free play write-offs could be the beginning of a trend. It’s another way to boost gambling tax revenue, which for many states means education funding. But Colorado’s version of this bill shows that reducing tax write-offs is also an opportunity to fix mistakes in early rollouts of gambling expansion. 

About the Author
Christopher Gerlacher

Christopher Gerlacher

Writer and Contributor
Christopher Gerlacher is a Senior Writer and contributor for Gaming Today. He is a versatile and experienced writer with an impressive portfolio who has range from political and legislative pieces to sports and sports betting. He's a devout Broncos fan, for better or for worse, living in the foothills of Arvada, Colorado.

Get connected with us on Social Media