Colorado walks back on exchange betting regulation plans
Centennial State regulator cites player tax loophole concerns in decision to take no action over proposals
Colorado’s Limited Gaming Control Commission (LGCC) has voted 3-1 to take no action on plans to potentially become the second US state to play host to exchange betting.
At a meeting on Thursday June 15, officials from the LGCC debated the plans before deciding to delay a decision on putting the rules in force, ostensibly to give the Colorado Division of Gaming (CDG) time to potentially revise its proposals.
The primary concern raised during the debate is understood to be whether the new exchange betting rules would potentially create a tax loophole for some exchange bettors.
In comments reported by The Denver Post, LGCC chairman Richard Nathan suggested the possible loophole could jeopardize the state’s ability to collect a 10% profits-based tax from operators, calling for more debate on the regulations.
“I believe that there should be an elevation of scrutiny,” Nathan told the Post.
Nathan’s comments were echoed by LGCC commissioner Justin Davis, who suggested caution in the approach.
“There aren’t any rules in place in the nation, or probably the world yet, so we need to proceed carefully,” Davis said.
“I know the division has done a lot of research to make that happen. But we’ve had a lot of issues raised. I think it’s important to proceed carefully,” he added.
Commissioners are also understood to have raised concerns about potential regulatory oversight of the next exchange market and whether existing regulatory authorities could provide this.
The proposed regulations define market makers as “any entity or authorized person in the state which has funds on deposit with an online operator by placing bets or buying and selling wagers on the exchange.”
These markets often attract more experienced gamblers, with the peer-to-peer (P2P) element and the ability to make substantial sums of money playing a part. Exchange operators often take commission from all bets placed, typically around 2%, with the operator paying a 10% tax on those commissions to the state.
At present, New Jersey is the only state in which exchange betting is permitted, however there are no rules to govern exchange betting operators. Exchange heavyweight Betfair previously operated in New Jersey but exited the Garden state market in 2020, citing disappointing financials.
Exchange betting operators including Prophet, American Sports Exchange, and Sportrade are active in the New Jersey market at present. Nevada attempted to introduce its own exchange market in 2015 but later floundered due to a lack of interest from bettors.