Arizona Eyes Betting Tax Hike, But Only for the Top Dogs

Arizona is considering a betting tax hike, following a broader trend in America and beyond. Unlike many other markets, however, the state is eyeing an increased tax only for the largest sportsbooks.

Arizona Considers a Tiered Tax Format

Under Governor Katie Hobbs’s proposed budget for 2027, Arizona could introduce a tiered structure to betting taxes, under which the top operators would have to deal with a tax rate of 45%.

The proposal asserts that a few top operators are attracting the majority of bets. Thanks to low privilege fees and generous tax deductions, these companies have been able to achieve record corporate profits, the document pointed out.

Because of that, Hobbs submitted the idea of creating a tiered fee structure to properly reflect the existing discrepancies between the industry’s top operators and their smaller counterparts.

The Proposal Is Not Entirely Clear

Arizona currently boasts a 10% tax rate on sports betting. Under Hobbs’s proposal, smaller companies (those with less than $75 million in average monthly revenue) would continue to pay a fee of 10% for online operators and 8% for land-based ones. At the same time, companies with over $75 million average monthly revenue will have to pay a fee of 45% instead.

The proposed budget emphasized that this tiered structure will not hurt smaller businesses and tribal companies that depend on gaming revenues.

However, experts pointed out that the current wording is somewhat ambiguous. For context, the average monthly betting revenue in Arizona is barely over $80 million, suggesting that the tiers might actually mean handle/betting volume when they refer to “average monthly revenue.”

As of the time of this writing, lawmakers have yet to clarify whether they truly meant handle. If so, the affected operators would include FanDuel, DraftKings, BetMGM, and Fanatics, the most recent handle figures of which exceed $75 million.

Additionally, a tax rate of 45% would make Arizona much less friendly to bigger sportsbooks, as it will effectively mean an increase of 35%.

In any case, the proposed tax rate comes amid a broader wave of tax hikes. Several states have already increased their taxes, with a few others still eyeing similar measures. The UK also opted to increase its wagering taxes, highlighting continuous headwinds for the gaming industry.