Colorado regulators have not completed background checks for most Internet operators in the state’s nascent sports betting industry, potentially allowing operators with criminal backgrounds or financial conflicts of interest to operate, a state audit has found.
The audit, released Tuesday, also found discrepancies between some operators’ reported net income and their tax payments on those wages, making it possible that Colorado is losing tax revenue from the industry.
The audit said the Division of Gaming and Colorado Limited Gaming Control Commission, shortly after the expanded gaming was approved by voters in November 2019, issued provisional licenses to meet the May 2020 start date for valid sports betting. ran for
A preliminary background check was required for the provisional license. But the division and commission have not yet approved a backlog to complete more detailed criminal and financial background checks to issue permanent licenses to those operators, the state auditor’s office found.
In March this year, 35 of the 39 operators – both casino and internet operators – had provisional licences, the report said.
One operator, which it did not identify, reported $1.4 million more in net income in its daily wager report than in monthly tax filings, the report said. It did not cite any specific wrongdoing.
The audit covered the first full year of legalized gaming in the state from May 2020 to April 2021. Colorado customers placed more than $2.3 billion in bets over that time period; 98% of those bets were made online.
Colorado taxes 10% of operators’ net income, with most of that revenue going to state water resource planning as well as industry regulation and behavioral health.
The auditor’s office recommended that regulators complete a regulatory framework to investigate operators and improve monitoring of industry reported earnings and tax payments. The department agreed to all the recommendations.