Gambling Tax Projections Fall Due To Casino, Sports Shutdowns

Written By Derek Helling on 04/30/2020 - Last Updated on May 2, 2020
gambling tax projections Colorado

The best-laid plans of state legislatures and men often go awry. Because of the COVID-19 pandemic, Colorado has significantly downgraded its gambling tax projections for this year. That’s all because of the shuttering of casinos and the major North American sports.

State officials now estimate that legal sports betting will bring in around $1.6 million this year. That represents about an 83% drop from the original projections. For the CO water management plan, that’s bad news.

The details on the downgraded gambling tax projections

When state officials originally made out the budget for this year, they included $9.6 million in revenue from sports betting taxes. In CO, the state taxes handle at a rate of 10%.

The new projection falls between $1.5 million and $1.7 million. It’s unclear what alterations to expenses the Colorado Water Plan might have to make in order to account for the shortfall.

The good news is that the water plan wasn’t wholly dependent on sports betting tax revenue to meet its budgetary demands. On the contrary, the $9.6 million was less than one-tenth of this year’s budget for the plan.

Regardless, a difference of around $8 million is significant. That’s mostly because sports betting tax is part of the long-term strategy for sustainably funding the plan.

It still might be possible to surpass the adjusted projection, however. That’s largely going to depend on how easily and quickly sports betting ramps up around the state.

Three factors that will determine the revenue this year

How things play out on three fronts will have a large impact on whether that $1.5 million-$1.7 million estimate is too generous or too conservative. They are all out of the plan’s hands, however.

The first is how quickly CO casinos resume operations. Although online sports betting is by and large the vehicle of choice, brick-and-mortar sportsbooks play an important part in helping casino patrons “make the jump” to wagering on sporting events.

The faster those facilities start operating and get their retail sportsbooks open, the more likely it is that more people who visit casinos to play slots and table games will also put some money down on sports while they’re there. That, in turn, will increase handle.

The second element in play in this situation is how quickly North American major sports return to action. That’s beginning to happen without spectators, with events like UFC 249 and NASCAR gearing up for early- and mid-May.

Again, that can’t happen fast enough for CO sports betting handle. When the games are happening again, that will undoubtedly drive CO bettors to online sportsbooks.

A third factor is those online sportsbooks. Four such operators are set to launch May 1, and more will follow throughout the summer.

The more resources they pour into competing with one another for market share in CO, the more likely it is that CO residents and visitors will make some wagers. That competition ramps up with each successive operator who goes live in the state.

Of course, the amount of tax revenue partially depends on how much disposable income Coloradans have as well. Getting to $17 million in handle might still be possible this year if things go well.

Surpassing $96 million in handle might not be too crazy if everything goes swimmingly, as well. The college football and NFL seasons are still ahead, and they typically bring in a lot of action.

That assumes those things occur this year, however. It’s better to be conservative in estimates. In terms of sports betting tax revenue, CO is hoping for the best but preparing for the worst.

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Derek Helling

Derek Helling is a lead writer for PlayUSA and the manager of BetHer. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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