Colorado lawmakers on Thursday approved a bill that would place a 5% fee on certain in‑game purchases in children’s online games, aiming to create a funding stream for youth mental health services.

Supporters say the measure would hold gaming platforms accountable for design features that can contribute to anxiety, depression, and compulsive spending in kids, while opponents — including industry groups and state officials — warn the proposal could violate federal law, raise privacy concerns, and unfairly burden players who may not benefit from the services it funds.

Sponsored by Reps. Sean Camacho, D-Denver, and Yara Zokaie, D-Fort Collins, House Bill 1148 would establish three enterprises, or state-owned businesses, to fund in-school counseling services, before and after-school programs, and an education rights enforcement program for students with disabilities.

The bill passed on a 38-25 vote in the House, with all Republicans and four Democrats voting in opposition. Its next stop is the Senate, where it is sponsored by Sens. Judy Amabile, D-Boulder, and Dylan Roberts, D-Frisco.

The enterprises would be funded through microtransactions in online games intended for children, such as Minecraft and Roblox.

Games like Minecraft and Roblox are intentionally designed to engage and addict kids, Zokaie told the House Finance Committee last week. Features like rewards, in-game purchases, and algorithmic recommendations lead to longer playing times, which studies have linked to increased sleep disruption, lower academic performance, and higher rates of anxiety and depression in kids.

“As a parent, this is something that I grapple with, and it’s also something I hear from other parents who describe to me how powerless they feel against the design choices of multi-billion dollar companies,” Zokaie said. “They tell me they’re doing everything that they know how to do, but it is not enough, and ask what more can be done. House Bill 1418 is one of those things.”

Federal cuts to programs like the Youth Mental Health Corps and a strained state budget have left many youth mental health services underfunded despite ever-increasing demand, Zokaie said. Creating enterprises to fund services like the Youth Mental Health Corps is a way the state can increase funding for such critical services.

“Without a dedicated state revenue source, programs in every part of Colorado face closures, layoffs, and impossible choices about who they can reach… the cost of letting these programs disappear is higher than the cost of sustaining them,” he said.

The legality of enterprises under the Taxpayers Bill of Rights has been upheld in the courts, Camacho said. Enterprises are exempt from TABOR unless they receive 10% or more of their revenue in grants from state and local governments.

Under state law, enterprise fees must directly benefit the individuals paying them. Some argued that adults who play games marketed to children would be forced to pay fees for services they don’t qualify for, and that many kids would be paying for services they don’t need or use.

“This bill places the burden of paying for a complex societal issue on a single industry and a single group of consumers, said Aaron Segel of the Entertainment Software Association.

If the bill passes, gaming companies would need to collect players’ geolocation data to confirm they live in Colorado, creating significant privacy concerns.

“We share your goal of improving youth mental health and recognize the urgency of that challenge,” said Segel. “However, House Bill 1418 is not an effective or appropriate solution.”

The measure “raises significant concerns” for the state’s Behavioral Health Administration, said Ryan Templeton, the agency’s policy and external affairs director.

The state needs “legal and reliable funding mechanisms” for youth mental health services, because if they go away due to a lawsuit or lack of funding, Colorado kids may be worse off than they were before.

Aside from concerns about TABOR, Templeton said the bill may violate the Internet Tax Freedom Act, a 1998 law that prohibits governments from taxing the internet or online activity. Furthermore, Templeton said, the bill could be unconstitutional under the Equal Protection and Dormant Commerce Clauses.

“We are not opposed to the programs that these funds support; it’s the mechanism,” Templeton clarified. “We’re concerned that it’s not legally a viable way to fund these programs.”

Supporters of House Bill 1418 argued that the mental health impacts online gaming has on kids and teens are too urgent not to invest in.

Heather Tritten of the Colorado Childrens’ Campaign referenced the organization’s annual Kids Count report, which found that over a quarter of high school students statewide reported persistent feelings of sadness and hopelessness, and 11% seriously considered suicide.

“There has been a rapid expansion of the body of research linking screen time to compulsive spending tendencies, decreased outdoor time, increased aggression, and decreased empathy,” Tritten said. “Colorado kids need and deserve a dedicated, durable funding stream for mental health supports, especially one that doesn’t put extra strain on the General Fund. HB 1418 creates that funding stream. HB 1418 is the kind of solution Colorado should be proud to lean on.”

Andrea Stojsavljevic of Children’s Hospital Colorado noted that American teens spend an average of five hours a day on social media, while research has found that just three hours of scrolling doubles the risk of poor mental health.

Online gaming platforms serve as a form of social media for younger kids, who can create profiles and chat with friends — and strangers — even if they aren’t old enough to have phones.

While gaming can have positive impacts, such as offering social connection, stress release, and cognitive benefits, excessive use has been found to be detrimental to both mental and physical health, Stojsavljevic said.

“The rationale behind House Bill 1418 is that platforms profiting from addictive design and targeting should contribute to programs that counteract their negative impacts,” she said.