New Bill Would Increase Funding for Problem Gambling, Close a Free-Bet Loophole

As Colorado closes in on the two-year anniversary of legal sports betting on May 1, House Speaker Alec Garnett, the main champion of setting up the market in Colorado, wants to exponentially increase the amount of money that the state earmarks for problem gambling.

"This is an important step to making sure Colorado is following best practices to serve those who may need help," says Alec Garnett, a Democrat from Denver. On April 28, Garnett was able to advance House Bill 1402, which would earmark at least $2.5 million annually for problem-gambling services and programs, in a 9-2 vote by the House Finance Committee.

If the bill is approved by the Colorado Legislature and signed into law by Governor Jared Polis, the new funding will massively increase the current $230,000 that goes annually to problem-gambling services. It will also close a loophole in the original legislation.

In 2019, Colorado lawmakers approved a bill that sought to legalize sports betting in the state and designate about 94 percent of the tax revenue generated from sportsbook winnings to the Colorado Water Plan, a creation of Governor John Hickenlooper's administration that was designed to ensure the state has water for farming, drinking and recreating for years to come. Since the bill called for a tax, voters had to approve Proposition DD on the November 2019 ballot. A slim majority of Colorado voters did, and the market went live on May 1, 2020.

Between then and the end of March 2022, bettors in Colorado wagered $6.55 billion on sports, resulting in the state collecting over $17 million in taxes.
In addition to providing funds for problem-gambling services, HB-1402 would limit how much sports-betting operators using free bets to gain new customers can deduct from their taxable revenues. Because of free bet write-offs, the state has been missing out on millions of dollars in potential tax revenue. Under this bill, the money captured by closing this loophole would go directly toward implementation of the Colorado Water Plan.

The additional $2.5 million for problem-gambling services would come from state gaming tax revenue and go into a fund that would then be broken into grants doled out to state agencies, local governments and nonprofit organizations. In particular, the grants would go to gambling addiction prevention programs, public awareness campaigns, gambling addiction treatment, recovery services and workforce training. That workforce training piece is especially key, since the Problem Gambling Coalition of Colorado lists just seven certified gambling treatment providers on its website.

"We’re hoping to increase that number," says Peggy Brown, board president of the Problem Gambling Coalition of Colorado. "If we can work with the counties and get them to see the need for additional training and we can provide some funding for that, I think we’ll be in a good place."

Aside from the guaranteed $2.5 million, the bill calls for the problem-gambling fund to receive hundreds of thousands of dollars in unspent hold-harmless money. The hold-harmless fund was set up to potentially refund money lost by certain businesses, such as off-track betting facilities, because of the legalization of sports gambling.

Any amount of cash would help, says Brown, who notes that the state's gambling hotline received far fewer calls prior to the legalization of sports gaming in May 2020. In 2018, that hotline received 6,546 calls. In 2021, it received 9,686 calls.

"That's a pretty significant rise," says Brown, who notes that her organization takes a neutral stance on legal sports betting and gaming in general. "Everybody can do the right thing and still make money."

Brown, a former compulsive gambler from Lakewood who has been in recovery for over two decades, points out that the negative consequences of problem gambling can be immense.

"With gambling addiction, there’s no saturation point. If you’re an alcoholic, you can only consume so much. With gambling, there’s no saturation level, so you can literally stay in action as long as you can get money someplace. The consequences to families and structures and relationships are devastating," Brown says, referencing terrible outcomes like "high rates of divorce, bankruptcy, debt, prison and criminal behavior."

Another key aspect of HB-1402 would be a new program allowing bettors to self-exclude from all sports-betting apps for a certain period of time — analogous to a current state program in which bettors can exclude themselves from all casinos. Additionally, the bill calls for sports betting operators to submit an annual report to describe the efforts they've made to "promote responsible gaming via advertising and other promotional methods and the licensee's plans concerning such promotional efforts in the current state fiscal year."

In particular, Brown would like to see more of an emphasis on the gambling addiction hotline in sportsbook  advertisements.

"What I've seen on television, the sports-betting operators put it in a font that is so small and for such a short duration on the screen that it can’t be read or, by the time you see it, you can’t even take a screenshot of it," Brown says. "We’re trying now to correct some of those things."

Projects associated with the Colorado Water Plan will receive the first batch of money from sports betting this July.