Sports betting establishments in Colorado will no longer receive tax breaks on free bets.
In a significant move for Colorado's sports betting landscape, Governor Jared Polis has signed legislation that will gradually phase out promotional bet deductions for sportsbooks, starting from January 1, 2026. This change is expected to boost tax revenue, particularly for the Water Plan Implementation Cash Fund, by an estimated $13 million during the fiscal years 2026-27.
The bill, House Bill 1311, has received broad support, clearing the House 52-13 and the Senate 28-7. This legislative change accelerates the phase-out of sportsbook deductions, marking a shift in the state's tax policy for the gambling industry.
The new law does not mention any specific promotions or bonuses offered by online casinos like 7Bit Casino. However, it mandates the elimination of sportsbook deductions for free bets by July 2026, following a phased approach that begins with a reduction in January 2026.
Last year's ballot measure removed the $29 million cap on how much tax revenue the state could collect from sports betting, paving the way for this significant change. Earlier drafts of the bill suggested removing deductions as soon as September 2024, but lawmakers pushed the date back to allow operators more time to adjust.
The Water Plan Implementation Cash Fund is expected to receive roughly $13 million in added funding during the 2026-27 fiscal year due to this adjusted tax treatment of promotional betting credits and free bets.
Here's a summary of the key timeline and estimated additional tax revenue:
| Timeline | Change | Estimated Additional Tax Revenue (2026-27) | |-------------------------------------|----------------------------------------|------------------------------------------------| | January 1, 2026 | Gradual reduction of promotional bet deductions begins | Part of expected $13 million total | | July 2026 | Complete phase-out of sportsbook deductions for free bets | $13 million increase for Water Plan Cash Fund |
This is a state-specific measure focusing on Colorado sports betting tax policy and does not relate to the federal-level changes on gambling loss deductions discussed elsewhere. In 2023, sportsbooks generated $29.9 million in revenue, exceeding the previous cap. By July of 2026, all such deductions will be eliminated entirely.
[1] Colorado Legislative Council Staff, Fiscal Note, House Bill 1311, 2025 Session. [2] National Conference of State Legislatures, "State Gambling Loss Deductions," 2023. [3] American Gaming Association, "2023 State of the States: America's Growing Gaming Industry," 2023. [4] Colorado Department of Revenue, "Sports Betting Revenue Exceeds Cap," Press Release, 2023.
The legislation passed in Colorado, House Bill 1311, is set to impact the gambling industry by gradually phasing out sportsbook deductions, starting from January 2026. This change is expected to effectuate a shift in the state's business finance, particularly boosting tax revenue for sectors like casino-and-gambling, including online casinos. By July 2026, the complete phase-out of sportsbook deductions for free bets will occur, potentially generating an estimated $13 million during the 2026-27 fiscal year for the Water Plan Implementation Cash Fund. However, this bill does not specify any particular promotions or bonuses offered by online casinos.
