With sports betting exploding, voters are being asked to allow Colorado to raise more taxes on water projects

Four years after sports betting was legalized in Colorado, it has become more popular than the lawmakers behind the legislation ever expected.

That means the 10% tax on betting revenue that helps fund water projects in the state is also raising more money than expected. Now lawmakers want voters to give them permission to use those excess funds instead of returning them to the casinos.

After Governor Jared Polis signed House Bill 1436 this week, the question is expected to appear on the November ballot.

“In Colorado, we love our sports,” said Brian Jackson of the Environmental Defense Fund, who helped draft House Bill 1436. “The Nuggets just finished a great series, and of course the Broncos are like a religion to them.”

When Proposition DD, which legalized sports betting, passed in 2019, lawmakers set a $29 million cap on the amount of taxes that could be raised to gain bipartisan support for the measure, he said. Anything above that cap goes back into wagering operations, such as casinos.

“Honestly, we never thought we would achieve this,” he said.

However, the cap was calculated using extremely limited data, as Colorado was one of the first states in the country to legalize sports betting. According to a state financial analysis, revenues this year are expected to exceed that cap by about $2.8 million. In the 2025-2026 fiscal year, it could exceed that cap by an additional $7 million.

“This is real money for water projects in this state,” said House Speaker Julie McCluskie, Democrat of Dillon, one of the main sponsors of Bill 1436.

When the state developed its first water plan in 2015, analysts estimated it would take $100 million per year to complete all of the necessary water projects in the state. The sports betting tax was crafted in hopes of providing ongoing funding for these efforts.

“I hope it will continue to be a growing, steady source of water revenue,” said Rep. Marc Catlin, a Montrose Republican who was a lead sponsor of House Bill 1436 and the 2019 bill that created Proposition DD. “I have high hopes for it.”

The Colorado Gaming Association also supports the proposal.

“We of course always intended to pay this 10% tax with sports betting,” said Peggi O'Keefe, the association's executive director. “The fact that we exceeded expectations does not change that in my opinion.”

In recent years, more money than ever has been invested in the state's water projects as concerns about the West's water supply grow. While Proposition DD passed by a narrow margin, supporters of House Bill 1436 believe it won't be quite so close this time.

“I think our public understands how important water resources are to Colorado,” McCluskie said.

The funds would go to various water projects in the state, as determined by the Colorado Water Conservation Board, including physical infrastructure such as water storage, agricultural projects, watershed health, recreation and land use planning.

Only a portion of the tax goes to water projects. It also helps fund the state's gaming division and state programs to treat gambling addiction.

Elliott Wenzler is the Western Slope politics reporter for The Aspen Times and its sister publications in Glenwood Springs, Vail, Steamboat Springs, Summit County and Grand County.