Voters could make Colorado the 20th US state to offer legal sports betting services at the November ballot. Apart from expanding the local gambling market with a new form of gambling, local lawmakers are hoping that the expansion could bring some fresh tax revenue for the state in the years to come.
If approved, the addition of sports betting to the legal gambling industry in the state would mark the first major expansion of Colorado’s gambling sector since 2008. It would also be the second expansion which local voters have given the nod to since legalization of gambling in 1991.
At the ballot which is set to take place on November 5th, Colorado voters will be given the chance to vote on Proposition DD, under which a major policy change in the state’s gambling market will be brought. As part of the measure, sports betting, which has long been part of the state’s black market, would be made legal in Colorado. Legalization of the activity would tax and regulate it, with the proponents of the change hoping for a fresh tax revenue stream to be brought to state coffers.
Legal Sports Betting Could Generate Necessary Funding for Colorado Water Plan
According to preliminary expectations, the annual tax revenue which could be generated by sports betting in the state could amount to up to $29 million, but according to some analysts, the level could be considerably smaller, between $6 million and $15 million annually in the first three years. The voter-information guide, which is known as “the blue book”, projects an even smaller tax revenue, averaging at about $16 million annually in the first five years. Unfortunately, these estimates do not make the prospects of Proposition DD very high.
The backers of Proposition DD on the statewide ballot have highlighted that if the projected revenues hit the targets, the generated proceeds would be used to fund one of the state priorities, the Colorado Water Plan, which has so far lacked a dedicated revenue stream.
Considering the cautious limits of sports betting revenue, it remains unknown whether the money which would be generated by the new form of gambling would be enough to fill in the hole in Colorado’s budget for the state’s Water Plan. The aspects of the latter have been attacked by some opponents of the idea, who claimed that Colorado’s water problems should not be solved by the expansion of the state’s gambling sector but by industries which are engaged in making contributions to water and climate issues.
What Is the Scope of Proposition DD in Regards to Sports Betting?
As mentioned above, Proposition DD is aimed at decriminalization of sports betting in the state of Colorado. If approved by local voters, it would regulate and tax the new form of gambling, with a 10% tax on sports proceeds set to be imposed after federal taxes and winner payouts.
For the time being, local casinos face a graduated tax as high as 20% based on their revenue.
The Proposition DD measure seeks to legalize betting on professional and college sports, motorsports, Olympic games, as well as on official video game contests and other esports. No betting on high school sports would be allowed though. So-called prop bets based on a certain player’s performance would also be allowed for pro sports but would remain suspended for collegiate athletics.
If approved, the measure would also restrict gambling to the three licensed casinos in Colorado – Cripple Creek, Central City and Black Hawk. Online sports betting would also be available through established sportsbooks which casinos sign as licensed contractors. The referendum would not affect daily fantasy sports (DFS). In fact, betting on DFS has already been given the green light by state legislature, which started licensing such operations in 2017. So far, the state of Colorado does not have a special tax regime for fantasy sports, but there could be some regulatory changes in the foreseeable future.
More details about the measure have been included in the blue book and a Colorado fiscal analysis.
Projected Tax Revenue Would Be Used to Fund State’s Community Needs
According to preliminary monetization plans, the first sports betting tax revenue which is brought to state coffers would cover the costs of the Colorado regulatory body, Division of Gaming. It would start at $2 million and is expected to increase in the years to come.
A 6% portion of sports betting tax revenue would be used to cover potential insufficiencies from other forms of gambling which make regular contributions to local communities. Another part of the expected tax revenue which is set to be generated after the addition of sports betting is planned to be redirected to some gambling and addiction services which are being managed by the Government. As part of the measure, $100,000 would be received by the Office of Behavioral Health for treatment of gambling disorders. Another $300,000 would be redirected to fund a crisis hotline which is currently operated by the Rocky Mountain Crisis Partners.
According to the estimates included in the blue book, the remaining $14.9 million would be used to fund Colorado Water Plan, as well as other water infrastructure projects. The water plan itself is an undertaking of a large scale which would address the long-term agricultural and urban water needs of the state and which cost is supposed to range from $20 billion to $40 billion. This would mean that the state would have to spend no less than $625 million on an annual basis in order to meet the financial needs of the project.
One Environmental Group Opposes Gambling Revenue Use for Water Plan Funding
So far, Proposition DD has faced relative small opposition. Affluent anti-tax groups have been cautious not to get involved in the arguments which could possibly emerge in regards to the measure. In addition, the proposed House Bill 1327 got significant bipartisan support from the state’s General Assembly which passed the proposed piece of legislation with 85 to 14 votes from both legislative chambers.
For the time being, it is only Coloradans for Climate Justice, a local environmental group, which has emerged as a registered campaign opponent to the idea of using revenue generated by gambling services to address Colorado’s water issues. The group has shared some concerns that future water infrastructure projects could be harmful to the local environment rather than helping it.
Other opponents of the proposal have said that the actual revenues generated by the addition of sports betting to the state’s legal gambling sector may not meet preliminary estimates. They have also reminded that gambling has been considered a threat to public health, as it could lead to addiction.
Some previous studies have also warned states, saying they should not be too dependent on gambling revenue when seeking fresh sources of funding their public-service meeds. In fact, gambling tax revenue nationally has not marked significant growth since the Great Recession, even though the majority of states have been succeeding to meet their short-time revenue targets in the first year of sports betting legalization.