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Arizona’s sports betting market is generating record revenue, and now Gov. Katie Hobbs wants the state to take a larger cut. Under her latest proposal, the tax rate on the largest online sportsbooks would jump from 10% to 45% for operators generating at least $75 million in monthly revenue.
The increase is a cornerstone of Hobbs’ $17.7 billion budget. State officials estimate the hike could generate an additional $150 million annually. While the math looks straightforward on paper, crossing the legislative finish line will be a significant challenge.
Which sportsbooks face a tax hike?
The proposal is not a blanket tax hike. It specifically targets industry heavyweights like DraftKings, FanDuel, BetMGM, and Caesars — companies that consistently clear the $75 million monthly revenue threshold in Arizona.
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Smaller operators: Would remain at the current 10% rate.
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Tribal casinos: Brick-and-mortar operations would not be affected.
The focus remains squarely on the large online sportsbooks in Arizona that dominate the state’s betting handle. Arizona’s 10% rate is currently among the lowest in the U.S. In contrast, states like New York, Illinois, Oregon, and Rhode Island tax operators at much higher levels, with some rates approaching 50%.
Supporters argue Arizona can increase its take without becoming a national outlier, especially since the top four players control roughly 75% of the market.
Why Arizona needs a betting windfall
The timing is calculated. Hobbs’ budget relies on nearly $950 million from uncertain funding sources. Beyond the $150 million expected from the sportsbook tax, the plan counts on significant federal border reimbursements that have yet to be guaranteed.
The betting industry, meanwhile, shows no signs of slowing. Arizonans wagered more than $8 billion in 2025. Nationally, more than $600 billion has been bet since the U.S. Supreme Court cleared the way for state-regulated wagering in 2018. With such massive volume flowing through mobile apps, state leaders view the industry as a vital revenue tap.
Will operators pass costs to Arizona bettors?
Despite the potential windfall, the politics are fraught. Republicans control both chambers of the Arizona Legislature and traditionally oppose tax increases. Furthermore, the state constitution typically requires a two-thirds supermajority to pass revenue-raising measures.
The Hobbs administration argues the increase could be structured as a “fee adjustment” through the Arizona Department of Gaming, a move that might bypass the supermajority requirement. That legal interpretation is expected to be a major flashpoint if the proposal moves forward.
Industry analysts are also sounding the alarm. When other states have hiked taxes, operators have responded by scaling back promotions or adjusting odds to protect their margins. Given that sportsbooks often operate on thin net profits after expenses, a jump from 10% to 45% represents a seismic shift for the Arizona market.
