On Nov. 5, voters in Colorado approved Proposition DD, meaning that Colorado’s sports betting legislation, HB 1327, will become effective on May 1, 2020.
As of this writing (with ballots still being counted), Proposition DD has 50.8% of the vote, narrowly avoiding a required recount. As we have detailed in prior alerts, whether voters would approve Proposition DD was up in the air because it was drafted to meet the complex linguistic formula required by a peculiar Colorado law called the Taxpayer’s Bill of Rights, or TABOR. TABOR required Proposition DD to be framed in terms of a tax, so instead of asking voters whether to legalize sports betting in a manner that taxes casino operators, voters instead were asked whether to increase taxes through implementation of sports betting and to use the money to pay for water conservation projects. Measures asking for a tax increase typically struggle, and because of this, many expected a close vote despite overwhelming support for the ballot measure among business and political leadership in Colorado.
We have summarized Proposition DD in a prior alert. Now that the measure has passed, we expect the following actions will occur over the next several months:
- Colorado’s Division of Gaming (“Division”) will likely release emergency rules on licensing with a stakeholder process to follow for the operational rules. The Division’s plan is to go live on May 1, 2020, and they intend to ensure that all participants have the opportunity to go to market at the same time. The emergency licensing rules should be released shortly, while the operational rules will be on a stakeholder/rulemaking schedule to be ready around April.
- To accomplish licensing by May 1, the Division plans to begin accepting applications for sports betting licensing by a certain date (not yet announced), allowing the Division to vet applicants and issue temporary licenses. The temporary licenses will be made permanent after the Division completes its full investigation and background checks on applicants.
- The new law allows license fees to be up to $125,000, but also requires the fee to be in an amount sufficient to recover the direct and indirect costs of processing the applications and conducting background investigations. As a result, we expect license fees will be lower than that.
Brownstein Hyatt Farber Schreck advises U.S. and foreign sports betting interests on the requirements to become operational in new jurisdictions in the wake of the recent U.S. Supreme Court decision setting aside the Professional and Amateur Sports Protection Act (PASPA). Since that decision, our attorneys have completed many of the first sports betting transactions outside of Nevada, playing a key role in the expansion of sports betting throughout the U.S. With this experience, Brownstein offers unique insight into the transaction structures, technology platforms and regulatory environments associated with today’s emerging U.S. sports betting industry.