What the law does
Colorado has historically allowed sportsbook operators to deduct the cost of free bets and promotional credits from their taxable revenue. That structure; combined with aggressive welcome-offer spending across the industry; meant Colorado's effective tax collection ran well below the headline 10% rate, especially in early years.
HB 25-1311, signed by Governor Polis in May 2025, accelerates a phase-out of that deduction. Beginning January 1, 2026, operators can deduct free-bet costs only up to 1% of monthly handle. On July 1, 2026, the deduction is eliminated entirely; meaning Colorado operators will pay the full 10% on gross sports betting revenue.
Phase-out schedule
Before July 1, 2025: Operators could deduct effectively unlimited promotional spend (subject to earlier HB 22-1402 reforms).
July 1, 2025 – December 31, 2025: Deduction capped at 2.5% of handle.
January 1, 2026 – June 30, 2026: Deduction capped at 1% of handle (current phase).
July 1, 2026 onward: Deduction fully abolished. Operators pay 10% on full gross gaming revenue.
Operator reaction
Publicly, Colorado operators have been measured; pointing to the gradual phase-in as evidence the state has worked with industry. Privately, conversations with operator executives at the SBC Summit North America earlier this month suggest a significant tightening of welcome offers and reload promotions is coming in late Q3 2026.
Smaller operators (Bally Bet, BetMonarch, Sporttrade) are less exposed because their promo spend was already lower per dollar of handle than the leaders. Expect the biggest welcome-offer adjustments at DraftKings, FanDuel, BetMGM and Caesars in the back half of 2026.
What it means for bettors
Short term; through June 30, 2026; current welcome offers remain unchanged. If you've been planning to claim a Colorado sportsbook bonus, the next six weeks are likely the most generous window we'll see for some time.
Medium term, expect lower welcome-offer caps, fewer reload bonuses, and a shift toward loyalty-based retention (Caesars Rewards, MGM Rewards, PENN Play) over upfront promotional spend. The structural advantage of bigger operator brands will only widen.
For tax projections, the state estimates fiscal 2026-27 sports betting tax collection at up to $120 million; roughly double the current run rate. The majority of those proceeds continue to fund the Colorado Water Plan.