Dead bait fish is fine, where bait is allowed. The intent is to prevent the spread of invasive species. Collection and transportation of bait fish may be more problematic. From page 9 of the CO fishing guide:
f. The seining, netting, trapping and dipping of fish is prohibited statewide
in all natural streams, springs, all waters in Adams, Arapahoe, Boulder,
Broomfield, Clear Creek, Denver, Douglas, Gilpin, Elbert, Jefferson and
Park counties, and all public standing waters in Rio Grande, Saguache,
Conejos, Costilla, Alamosa, Mineral and Hinsdale counties in the Rio
Grande drainage. This does not apply to fish handled or produced at commercially licensed aquaculture facilities.
That whole section has more information regarding bait fish collection and use. My best interpretation of the fishing regulations:
1. Make sure you are using legal methods to collect the bait fish.
2. Make sure you are allowed to collect bait fish from the body of water.
3. Make sure you are allowed to transport it.
4. Kill the bait fish before you transport it.
But I ain't no blood sucking lawyer, so don't quote me...