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Colorado Is The Next Big US Sports Betting Market

James Murphy by in Trending News on
  • Sports betting in Colorado is scheduled to launch on May 1, 2020.
  • The combination of reasonably intelligent regulation and a casino industry with plenty of independent ownership could make Colorado a major sports betting player.
  • A total of nine sports betting operators have already inked deals in Colorado with more to come.

I’ve been guardedly optimistic about the future of sports betting in Colorado since legislation was signed by Governor Jared Polis on May 31, 2019. That might not be the most accurate way to describe it. More like ‘I’ve been on record saying that Colorado sports betting will be huge if some government entity doesn’t screw it up’. Despite a few anxious moments and a ridiculously close vote to approve the taxation structure for sports betting there has been no significant damage done. There are a few components of Colorado’s regulations that are bad but everything else is overwhelmingly good and I don’t think I’ve said that yet about any of the states that have legalized sports betting post-PASPA.

Over the past few months I’ve spent a lot of time in Colorado. I get the impression that they don’t quite realize that they’re about to shoot to the top of the ‘Best Sports Betting States’ hit parade. That’s kind of surprising for a state that has seen legal recreational cannabis become a huge revenue generator. It could be that no one in the media that would be responsible for covering the looming sports betting launch has the kind of background to give it proper context. Political media in most states doesn’t have any background in sports betting on a practical or regulatory level. The business media might be more cognizant of the financial potential of sports betting but are less likely to realize just how good the Colorado framework will be. The sports media usually has at least a peripheral knowledge of sports betting but not so much from a financial perspective.

How big could Colorado sports betting become? Ever hear of a state called ‘Nevada’? Although the Silver State is likely going to remain the ‘gold standard’ in sports betting for some time to come Colorado could soon become #2. I’m not so much talking revenues though there will be plenty of money made. I’m talking about becoming the second best jurisdiction in qualitative terms. Mind boggling though it may sound Colorado could quickly rival Nevada as *the* place to be for serious sports bettors.

THE NUMBER OF INDEPENDENT LINE ORIGINATORS WILL RIVAL NEVADA AND NEW JERSEY

This is the genesis of my excitement about Colorado sports betting. From the perspective of a bettor, a decent variety of independent betting lines is essential. The most fundamental thing that a sports bettor can do to improve his chances at turning a long term profit is to ‘shop points’. Unfortunately (though inevitably) the number of independent lines in Nevada dropped substantially over the past few decades due to consolidation within the industry (there are some signs that the pendulum is swinging the other way but that’s a different conversation for a different time). Even so, Nevada still has more independent lines than any state in the US. Counting all of the companies that manage multiple sports books along with the half dozen or so independent books there are right around 16 different line originators in ‘The Silver State’.

New Jersey has a fair assortment of ‘skins’ which gives the impression of a vigorous sports betting marketplace but the reality isn’t so impressive. The ‘back end’ of a number of online sports betting options are run by a small group of companies like Kambi and GiG. The result is that New Jersey has right around 10 independent line originators. Most other legal gaming markets have but a handful.

As of this writing there are already ten sports betting companies that have signed deals to serve the Colorado market. There’s a couple more that have been rumored to be entering the market but that have yet to make an announcement nor could I otherwise verify this. What this means is that right out of the gate Colorado could have more independent lines than any US jurisdiction outside of Nevada. This is a function of a relatively fragmented casino industry where 20 some odd companies own the 33 casinos in Colorado. There are also three tribal casinos. I’m not sure if the state knowingly set out to create this type of dynamic environment for bettors but they’ll benefit greatly from having done so.

COLORADO HAS CREATED AN ENVIRONMENT FOR SPORTS BETTING TO BECOME A CATALYST FOR INVESTMENT AND JOB CREATION NOT A CASH GRAB

The number of independent lines in Colorado will be downright amazing for sports bettors but I’m not sure that the state can take much credit for it. Sure, they drafted a regulatory framework that should allow it to happen but a large number of ‘independent outs’ was likely not what the relevant bureaucrats were going for. On the other hand, they deserve a ton of credit for taking the ‘long view’ in terms of revenue. The tax rate on sports betting won’t be the lowest in the US (Nevada and Indiana at 6.75%) but is a reasonable 10%.

More significantly, Colorado has created an environment where sports betting can flourish and create countless ancillary economic benefits. Many states have treated licensing fees as a pure cash grab–for example, the downright laughable $10 million fee charged by Pennsylvania. Colorado has kept their licensing fees extremely reasonable both for the ‘Master Licensees’ (eg: the casinos) and the various third party companies that will power their in person and online sports betting operations. Although the specific numbers are still in the shakeout process the sports betting legislation specified that license fees would be no more than $125,000′. Judging from the fee scale for other types of gaming permits it will likely be significantly less. A casino license fee is no more than $8,000 with an extra $2,250 fee to add table games. Licenses for suppliers, manufacturers and slot machine route operators are no more than $7,500. Assuming that ‘sports betting operators’ will fall under one of these categories there should be plenty of competition among technology providers for both in person and online wagering.

The reasonable licensing fees will attract a variety of sports betting related businesses to the state and that’s where the ancillary economic benefits come from. Australian sports betting company PointsBet is in the process of opening a Denver office and they’re likely the first of many. If Colorado plays their cards right, Denver could be the center of the US ‘B to B’ sports betting industry before long.

STATEWIDE ONLINE BETTING TIES IT ALL TOGETHER

While states like New York and Mississippi bumble along without an online betting component Colorado got it right from the get-go. Currently, the regulations limit sports betting to the brick and mortar properties in the three mountain casino towns (Black Hawk, Central City, Cripple Creek) along with the state’s 3 tribal properties. Any master license holder can ‘contract with a licensed “sports betting operator” or a licensed “internet sports betting operator”, or both, for the operation of sports betting.’ This is what is going to make it all work. The casinos will open live sportsbooks at their properties but are able to set up an online presence with one or more other companies.

SPORTSINSIDER.COM will be in Colorado on May 1 as they ‘flip the switch’ on legal sports betting in the state. Stay tuned.

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