Sports Betting Has Created Additional Tax Revenues and Issues with Problem Gambling
Once betting became legal in Colorado in 2020, the industry seemed to surge instantly. Advertisements for local casinos and big national sports betting companies could be seen just about everywhere from billboards to social media to TV ads.
In fact, as soon as the industry came to the state, casinos saw big revenue jumps and betting has already hit record numbers. But many have wondered whether the legalization of betting has helped or harmed the state.
The truth is, just like most new things, the addition of sports gambling has brought both the good, the bad and the ugly. The state has gained significant tax revenue, but the number might not be as large as many had originally thought. And some have stated that the addition of a new type of gambling has created other issues that the tax revenue has not been helping with like the increase in gambling addiction.
Do All Sports Betting Companies Pay Colorado Taxes?
According to the Colorado General Assembly website, every company that operates gambling or sports betting company is required to get a license through the state, which obligates them to pay a ten percent gaming tax on their profits if the business does not fall under the gaming tax exemptions. “Casinos operating on the Ute Mountain, Ute and Southern Ute Indian Reservations in Archuleta, La Plata and Montezuma counties are not subject to the gaming tax,” according to the state website.
When betting first became legal, anyone who wanted to be involved in the industry had to apply for either on-site sports betting, mobile sports betting or both and be subject to the state gaming tax. According to an article published by Colorado Public Radio, all of Colorado’s 33 casinos have master licenses for sports betting and two-thirds of them are licensed for mobile betting. All national betting companies like Draft Kings or Fan Duel must apply for a gaming license in Colorado in order to do business in the state.
How Betting Tax Revenue Works
The CPR News article also reported that during the first year of sports betting, the state collected $6.6 million in tax revenue. However, that number is relatively small compared to the over $2.3 billion that Colorado sports bettors wagered in the first year of it being legal. According to the Sports Betting Dime website, the state has generated over $17 million in taxes between May 2020 and March 2022 out of the $6.5 billion that was spent on sports betting.
According to state law, Colorado only taxes the profits casinos make from sports betting. So, when the house wins, the state collects a 10 percent tax on those profits. When the bettors win in betting, the lucky individuals must pay income taxes on their winnings, but those numbers are not counted in the betting tax revenue reports.
How Do the Tax Dollars Get Spent?
CPR News explained that the program first had to pay back over $1.7 million that legislators allocated to cover startup costs to regulate sports betting. Then, 6 percent of the tax dollars received go into a “hold harmless fund” that is meant to make up for the loss in tax revenue from traditional gambling. “The entities that can apply for this money include the state historical fund, counties and cities with casinos, and community colleges,” CPR reported.
According to Proposition DD passed by voters in 2019, the majority of the tax revenue from sports betting goes to water conservation and storage projects. And some of the money (around $130,000 in the first year) goes directly to gambling addiction services, such as counseling and crisis hotlines.
Betting Causes an Increase in Gambling Addiction
Ever since sports betting became legal in Colorado, several news outlets have reported an increase in gambling addiction issues in the state. Many have said that since mobile betting is much easier than other forms of gambling, the chances of addiction are significantly higher.
Peggy Brown, the board president of the Problem Gambling Coalition of Colorado, told The Colorado Sun that calls and texts to Colorado’s gambling addiction helpline increased 45 percent from 2020 to 2021.
“Sports betting is, at a minimum, twice as addictive as any of the other forms of gambling,” Brown said. “It’s taxing resources.”
And, even though the addition of betting has made addiction problems skyrocket, many have said that the issue isn’t new for the state. “Colorado hasn’t prioritized problem gaming — ever,” Colorado State House Speaker Alec Garnett told The Colorado Sun. “And so this isn’t just a betting issue. This is an issue around gambling and making sure that people have access to the resources that they need, whether it’s betting or table games or slots or other forms of gambling. So it’s time for Colorado to kind of take the lead in that position.”
Many experts have said that the state underestimated how fast betting would catch on since mobile betting eliminates the hurdles of traveling to a casino like other forms of legal gambling. Even though betting is still relatively new, as The Colorado Sun article reports, many of those in the addiction counseling industry have already called for the state to come up with more funds to put into helping people with gambling addiction problems.
