Colorado’s gaming regulators on Thursday did not approve a plan that would open the state to a new form of sports betting that’s been described as a stock exchange for gamblers.
The Colorado Limited Gaming Control Commission voted 3-1 to take no action on proposed rules for exchange wagering, a form of online sports betting that bypasses oddsmakers at traditional sportsbooks and allows gamblers to wager against each other.
If the plan had been approved, Colorado would have become the first state to establish specific rules for exchange wagering and would have become just the second state in the nation to host it.
However, the majority of the commissioners were concerned that the new rules would create a tax loophole for some who play the exchange. The commissioners agreed to delay a decision and give the Colorado Division of Gaming time to revise its proposal.
Richard Nathan, the commission’s chairman, said he worried the possible loophole would go against the state legislature’s intent that gambling operators pay a 10% tax on their profits.
“I believe that there should be an elevation of scrutiny,” Nathan said.
Commissioners also questioned how much oversight the new online gambling platforms would need and whether the state’s regulators have enough capacity to provide it.
Under exchange wagering, gamblers can set their own odds on a game in hopes that another gambler takes them up on the bet. Odds are not set by in-house mathematicians and analysts, so gamblers are playing against each other and not the house.
Exchange wagering attracts more sophisticated gamblers and people who are looking to treat sports betting as if it were a financial investment.
The exchange wagering operator makes money by keeping a commission from the bets, which is typically 2% or 2.5%. The operator would pay the 10% state gambling tax on those commissions and would be responsible for following all of the state’s gambling laws, such as contributing to responsible gaming funds and preventing money laundering.
So far, New Jersey is the only state where people can place sports bets on an online exchange, but that state did not create specific rules for it.
Exchange wagering is often compared to a stock exchange because people can buy and sell shares of their bets.
A similar form of online sports wagering was introduced in 2015 in Nevada, but it failed after one gambling company ran afoul of the Securities Exchange Commission. That style of play also struggled to gain interest from casual sports bettors.
It was the possibility of outside investors who want to sink large sums of money into the exchanges that gave pause to Colorado’s gaming commissioners.
“There aren’t any rules in place in the nation, or probably the world yet, so we need to proceed carefully,” Commissioner Justin 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.”
Get more Colorado news by signing up for our daily Your Morning Dozen email newsletter.
