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Colorado Athletic Department Nets $1.6 Million From Sportsbook

Oct. 2, 2020, 11:57 PM

The first college sports deal with a gambling company outside of Nevada is worth $1.625 million, and includes tax-write offs, Bloomberg Tax has learned.

The five-year cooperator sponsorship deal between the University of Colorado and PointsBet—an Australian based bookmaker launching its U.S. headquarters in Denver—is the latest in an explosion of ad-deals between sportsbooks and teams or leagues, although its the first collegiate pact of its kind.

Since the U.S. Supreme Court cleared the way for states outside of Nevada to legalize sports wagering two years ago,18 states plus the District of Columbia have begun to regulate and tax sports betting, including Colorado.

State taxes, which range anywhere from from 2% to 51% depending on the jurisdiction, resulted in $118 million in revenue across 14 states last year.

Since going live in March, Colorado has collected $744,890 total taxes from legal sports betting.

The University of Colorado agreement with PointsBet deal was announced last month, but without details. Under terms of the deal—which were disclosed by the university late Friday following a public records request—PointsBet will have a wide-ranging use of branding itself as a “Proud Partner of the Colorado Buffaloes” on a wide range of sports advertising, sponsorship and promotional inventory.

Last year the NFL nabbed sportsbook partnerships for 21 teams, reporting a 6% uptick in advertising revenue, which was likely taxed at a 21% corporate rate according to Alex Reid, a partner at Morgan Lewis Bockius LLP.

Likely Tax Exempt

The PointsBet deal is limited to neutral statements about the product in and around university athletic facilities, as well other broadcast and game day advertisements—likely exempting it from any taxes under IRS guidelinesfor qualified sponsorships.

Included in the deal is $75,000 annually to “support the development of student athletes and PointsBet recruitment,” a portion of which is tax deductible for PointsBet.

PointsBet is prohibited from using any student-athlete’s name or likeness without the university’s blessing. The NCAA, responding to action from several states, has promised to allow athletes to earn compensation for such use by January. Colorado’s own student-athlete compensation law, signed by Gov. Jared Polis (D) in March, takes effect in 2023.

The deal is the first agreement between a college athletic department and a sportsbook outside of Nevada—where sports betting has been legal since 1949. Shortly after PointsBet and the University of Colorado announced the agreement last month, William Hill, a London-based bookmaker, revealed it has held a smaller marketing deal with the University of Nevada since 2017.

To contact the reporter on this story: Sam McQuillan in Washington at smcquillan@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Gregory Henderson at ghenderson@bloombergindustry.com

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