Audit Shows Colorado Could Be Missing Out On Sports Betting Revenue

• The Colorado Office of the State Auditor discovered issues during its audit of the sports betting market in Colorado.
• The Division of Gaming has given out too many temporary sports betting licenses, costing tax dollars in the process.
• The audit covered the first full year of sports betting in the Centennial State.

DENVER – A recent audit was done by the Colorado Office of the State Auditor which examined the first year of sports betting in Colorado.

The audit revealed that Colorado was actually missing out on tax revenue due to the Division of Gaming and the Colorado Limited Gaming Control Commission has issued too many temporary betting licenses.

The Colorado sports betting market saw nearly $2.3 billion wagered in its first year making the potential missing tax revenue a major issue.

Colorado Audit

The 56-page audit covered the betting market in Colorado from May 1, 2020, to April 30, 2021. This covered all betting licenses and revenue reported from sportsbooks during that period.

“Overall, the audit found that the Division and the Commission did not have effective processes to investigate sports betting operators and make sure they were qualified for temporary licensure, or to collect sufficient documentation to determine if sports betting operators’ monthly tax filings were accurate,” said Jenny Atchley when covering the audit report. “Incomplete investigations increase the risk that the Commission is making temporary licensing decisions that are not fully supported or defensible.”

According to the report, 35 of the 39 total sports betting operators in Colorado held temporary online sports betting licenses as of March 22, 2022.

Because the licenses were temporary, the operators did not go through the required background checks, allowing them to operate with limited oversite. Despite the temporary licenses having a limited background check, the privileges that these operators were granted were the same as permanent licenses.

The audit also revealed that within five temporary licenses being issued, the limited background investigation was not met.

The auditing body recommends that the Division of Gaming needs to improve its investigations to incorporate sportsbooks into a regulatory framework. The division has publicly acknowledged the concerns and vowed to improve the process going forward.

Missing Money

What mainly stood out in the audit was the discrepancy between the amount of legal sports betting activity that was reported, and the amount of revenue that was reported monthly.

Colorado taxes sportsbooks at a 10% rate. In the fiscal year 2021, sportsbooks paid $8.6 million in taxes. Auditors discovered, however, that the numbers reported for the daily gaming activity and monthly activity didn’t add up.

There was a $1.4 million discrepancy in daily reports compared to monthly reports for one sportsbook; another discrepancy was $1 million. These discrepancies lead to inconsistent revenue reports at the end of the year.

This issue has been sent to General Assembly for further investigation.

News tags: Colorado | Colorado Division of Gaming | Denver | Governor’s Office of Information Technology | Jenny Atchley | Office of the State Auditor | OIT