Proposition JJ Seeks to Retain Extra Betting Tax Revenue in Colorado

A proposal that will appear on the ballot in November will try to keep excess tax proceeds from sports betting in Colorado and use them to fund different water projects.

The Proposal Will Appear on the Ballot in Colorado Next Month

This is the purpose of Proposition JJ, under which Colorado voters will be asked to vote in favor or against retaining excess tax revenue collected from legal wagering across the state. Colorado legalized sports wagering after a November ballot in 2019. The legalization followed a swift launch of online and retail statewide betting from May and June in 2020. However, at the time, the state set a $29 million tax revenue cap for the activity under the imposed 10% tax rate.

But the sports betting market surpassed the initial expectations, considering that the tax revenue for the 2022-23 budget year hit $25.6 million. While this figure is under the $29 million cap, the preliminary results for the 2023-24 budget year point to $29.9 million in tax revenue, a result that is $0.9 million above the current $29 million cap.

What this means in the context of the existing regulation? Well, per the current framework, tax revenue collected above the $29 million cap is due to be refunded to casinos and sports betting operators. This is why lawmakers in the state-supported Proposition JJ, which would enable the state to keep and spend the excess tax revenue from betting taxes to boost water projects. It’s important to note that if approved, Proposition JJ won’t increase taxes.

Keep the Extra Tax Revenue or Refund It to the Gambling Sector

Considering that the change in the laws is related to taxes, it would need to receive approval from voters in Colorado. This is why voters will be asked on November 5, 2024: “Without raising taxes, may the state keep and spend all sports betting tax revenue above voter-approved limits to fund water conservation and protection projects instead of refunding revenue to casinos?”

If the ballot proposal is approved by the voters, Colorado will keep and spend the extra tax revenue collected above the $29 million cap, benefitting water projects. On the other hand, if Coloradoans vote against Proposition JJ, the “state will pay refunds to casinos and sports betting operators when sports betting tax revenue is greater than the amount previously approved by voters.”

A majority of the sports betting tax revenue is already used for the benefit of water projects in Colorado. Not unexpectedly, part of the revenue is also dedicated to treating problem gambling.

Proposition JJ doesn’t come as a surprise considering the expected $0.9 million betting tax revenue above the $29 million cap expected for the 2023-24 budget year. Further projections estimate that the excess revenue will continue growing, hitting $1.2 million and $2.5 million for the 2024-25 budget year and 2025-26 budget year respectively.