Colorado Regulators Maintain Gaming Tax Structure For Upcoming Fiscal Year


Against a backdrop of unprecedented financial uncertainty brought about by the COVID-19 crisis, the Colorado Limited Gaming Control Commission voted unanimously on Thursday to maintain its current gaming tax structure for the upcoming fiscal year.

During a lengthy hearing that lasted nearly five hours, the LGCC heard a spirited debate on whether to decrease state gaming tax rates for Fiscal Year 2020-2021, beginning on July 1. A motion before the Commission sought to modify six tax brackets and the accompanying tax rates imposed on casino adjusted gross proceeds (AGPs). The Commission reviews state gaming tax rates annually and has the authority to raise or lower rates as long as they do not exceed a 40% threshold.

“The casino gaming industry and now our online components of sports betting are very critical, they produce jobs and we’re not insensitive to the fact that they are undergoing a great deal of pain,” Commissioner Richard Nathan said at the hearing. “I think the pain is shared pain, it’s unique, it’s dramatic, but the way for us to address it is not by adjusting this tax structure.”

Tax debate

With both city governments and gaming operators struggling from the lengthy closures, the Commission heard compelling arguments from both sides on whether the state’s gaming tax structure should be modified. Daniel Holmes, gaming partner at accounting firm RubinBrown, LLP, noted that Colorado casino operators lost approximately $99 million in revenue over a six-week period through April 30, translating to about $17 million in lost state taxes.

The LGCC received reports from leaders of the state’s three gaming communities: Black Hawk, Central City, and Cripple Creek, all of which urged the Commission to maintain the current gaming tax structure for the upcoming fiscal year. Citing the impact of the lengthy closures of retail casinos in recent weeks, Cripple Creek Finance Director Paul Harris emphasized that the shutdowns may result in at least a 50% reduction in the revenues the city collects in taxes from casino operators.

The Colorado Gaming Association, a non-profit association that represents the interests of the Colorado commercial casino industry, proposed a modified bracket structure that sought to lower the tax liability for the smallest casinos in the state. Under the current tax structure, casinos are required to pay a tax rate of 0.25% on adjusted gross proceeds up to $2 million, the lowest of the six brackets. The highest tier requires casino properties to pay a rate of 20% on adjusted gross proceeds above $13 million. Under the proposed changes, adjusted gross proceeds up to $5.5 million would have been taxed at a rate of 0.25%. At the same time, only proceeds in excess of $22.5 million would have been levied at the highest rate.

Mark Grueskin, general counsel for the Colorado Gaming Association, argued that the temporary bracket modifications served as a mechanism to jumpstart the industry in order to bring back customers and employees.

The introduction of legalized sports betting also played a role in the debate. Holmes is optimistic that pent-up demand among consumers will provide a boost to the industry when retail casinos open up. The advent of sports betting from a retail standpoint could also bolster activity among slots and table games, he indicated. Grueskin, however, noted that since sportsbooks operate on slim margins the added revenues from sports gambling will not serve as a buffer for the economic losses brought about by the crisis.

Last August, a fiscal impact statement from the Legislative Council Staff, a nonpartisan services group for the Colorado legislature, estimated that the introduction of legalized sports betting would bring up to $6.5 million in tax revenue to the state in Fiscal Year 2019-20 (for a partial year) and as much as $29 million annually thereafter. Over a five-year period through Fiscal Year 2024-2025, sports betting is expected to bring an annual average of $16 million in tax proceeds to the state, the analysis found.

Colorado Division of Gaming Director Dan Hartman has cautioned that the figures will likely need to be revised due to the uncertainties from the recent shutdowns.

Licensing action

The LGCC also issued more than two dozen sports betting related licenses Thursday in its first hearing since the state launched legalized sports gambling on May 1.

The Commission approved licenses on Thursday in three categories, including the renewal of the Retail License of Colorado Grande Hotel and Casino. The casino property located in Cripple Creek has yet to announce a sports betting partner from a retail and mobile standpoint. The renewed license will be valid for the next two years until expiration in May 2022.

The vast majority of the license approvals occurred in the First Vendor Minor Licensing category, headlined by Genius Sports Media, Inc. Launched in 2016, Genius Sports Media is a division of Genius Sports Group, a leading sports technology provider with locations in six continents worldwide. Genius Sports, one of the world’s top sports betting data providers, is the main competitor of Sportradar Solutions LLC, another leading data supplier that received licensing approval from the Commission in April.

The LGCC approved the licenses of Vig it Technologies LLC, XLMEDIA US Limited, Murphy Marketing, Media Players US LLC, Xtremepush Limited, Equinix LLC, Secure Trading Inc., and Skrill USA, Inc at Thursday’s meeting. The Commission also issued licenses in the category to Fantasy Advantage Ltd., Catena Operations Limited, Optimove Inc., Huntington Press, Inc., SportsContentCo, LLC, Prime Time Odds LLC, First Data Merchant Services LLC, TeleCheck Services, Inc., Sports Betting ST, LLC, Win Daily Inc., and Intellr, Inc.

Here are the remaining companies that received license approval in the category:

  • LocationSmart GeoLocation LLC
  • The Trifect Group Pty Ltd
  • Sportsbet Media LLC
  • Denver Sports Betting, LLC
  • CapWize Inc.
  • BetterThanYou Inc.
  • Apps4 Web Media Limited
  • Marzen Media LLC
  • Horseneck Media LLC
  • Mark Knight
  • Metric Gaming LLC

In addition, the LGCC issued Temporary Vendor Major Licenses to three companies: Deck Prism Sports LLC, Banach Technology Limited and Amelco UK Limited. Deck Prism Sports is a Las Vegas-based company that provides proprietary modeling options for in-play sports betting odds.

With retail casinos across the state still closed under Gov. Jared Polis’ “safer-at-home” order, legalized sports betting in Colorado is understandably off to a slow start. Every retail casino statewide has remained shut since Polis ordered the temporary closure of all non-essential businesses in March due to the COVID-19 crisis. While six operators have rolled out mobile sports platforms following FOX Bet’s Colorado debut on Tuesday, betting volume has been limited with traditional May sports such as Major League Baseball, the NBA, and the NHL on hiatus.

Prior to the rollout of legalized sports betting, the Commission approved the Master Sports Betting Licenses of all 33 non-tribal, retail casinos statewide, as of April 30.

The Commission is scheduled to meet next on June 18.

Matt is a veteran writer with a specific focus on the emerging sports gambling market. During Matt's two decade career in journalism, he has written for the New York Times, Forbes, The Guardian, Reuters and among others. In his spare time, Matt is an avid reader, a weekend tennis player and a frequent embarrassment to the sport of running.

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