Colorado Gov. Passes HB 1311, Ending Sportsbook Promo Deductions

Colorado’s House Bill 1311 has been signed into law, marking a key change to how sportsbooks are taxed. The bill will effectively eliminate tax deductions that sports betting operators previously enjoyed, minimizing their incentive to offer promotions.

Colorado to End Sportsbook Promo Deductions in 2026

Previously, the Centennial State allowed sportsbooks to deduct the free bet promotions, promotional payouts and federal excise taxes when calculating their net proceeds. This effectively allowed operators to freely offer promotions and grow their brands and businesses.

However, HB 1311, which was introduced earlier this year, sought to end this in order to generate extra taxes for state initiatives.

Under the tax framework introduced in 2019, 10% of operators’ net revenues fuel Colorado’s Water Plan Implementation Cash Fund, which seeks to improve the state’s water-related infrastructure.

Once HB 1311 is enforced, operators will effectively pay more taxes and, by extension, provide extra support to the fund. Experts project up to $3.2 million in extra funding for the Water Plan in 2026 and up to $12.9 million in extra funding in 2027.

HB 1311, however, will not immediately end tax deductions. Instead, deductions will be gradually phased out. As of January 1, 2026, operators will only be able to deduct an amount equal to 1% of all wagers. On July 1, 2026, the deduction will be revoked.

HB 1311 Is Now a Reality

HB 1311 made quick strides and received overwhelming support from lawmakers. Two weeks ago, the Senate passed the measure with 52 votes in favor of it against 13 votes against.

Now, Governor Jared Polis has signed the bill into law, making the end of free bet deductions a sad reality for sportsbook operators. Lawmakers justified the measure with the initial reason for the deductions, which was allowing sportsbooks to establish their businesses and build their brands. Now that they have done it, the purpose of the deductions has been fulfilled.

In the meantime, lawmakers are considering a legislative package that would further change how gambling winnings and losses are treated when determining taxes.

The extend of HB 1311 has yet to be seen. It is almost certain, however, that sportsbooks will gradually lower the number of bonuses their offer to their players. Critics of the measure argue that this could spell trouble for the sector as it would make legal operators less competitive in the face of growing pressures from offshore operators.