Four years after sports betting became legal in Colorado, the wagers have proven to be more popular than the lawmakers who crafted the legislation ever anticipated.

That means the 10% tax on the bets’ revenue, which helps fund water projects in the state, is also bringing in more money than expected. Now, lawmakers want voters to give them permission to use those excess funds instead of giving it back to the casinos.

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

“In Colorado, we love our sports,” said Brian Jackson with the Environmental Defense Fund, which helped craft House Bill 1436. “The Nuggets just ended a great run and obviously the Broncos are like a religion.”

When Proposition DD, which legalized sports betting, was approved in 2019, lawmakers set a $29 million cap on the amount of taxes that could be collected as part of an effort to get bipartisan support on the measure, Jackson said. Anything above that cap goes back to the betting operation, such as casinos.

“Frankly, we never thought we would reach that,” he said.

But the cap was calculated using extremely limited data because Colorado was one of the first states in the country to legalize sports betting. This year, the revenue is expected to exceed that cap by about $2.8 million, according to a fiscal analysis by the state. By the 2025-2026 fiscal year, it could be an extra $7 million.

“That’s real money for water projects in this state,” said House Speaker Julie McCluskie, D-Dillon, a prime sponsor of House Bill 1436. 

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

“I’m hoping it will continue to be a growing, steady revenue stream for water,” said Rep. Marc Catlin, a Montrose Republican who was a prime sponsor on House Bill 1436 and on the 2019 bill that created Proposition DD. “I have high hopes for this.”

The Colorado Gaming Association is also supportive of the ballot measure. 

“We certainly always intended to pay that 10% tax with sports betting,” said Peggi O’Keefe, executive director of the association. “The fact we exceeded expectations I don’t think changes that.” 

In recent years, more money than ever is going toward water projects in the state as concerns deepen over the West’s water future. While Proposition DD passed with a slim margin, supporters of House Bill 1436 believe it won’t be quite as close this time around. 

“I believe our public has grown to understand how critical water resources are to Colorado,” McCluskie said. 

The funding would go toward a variety of water projects in the state as determined by the Colorado Water Conservation Board, including physical infrastructure like water storage, agricultural projects, watershed health, recreation and land use planning. 

While the vast majority of the tax goes toward water projects, a portion also goes toward helping fund the state’s Division of Gaming and state programs for treating gambling addictions.