Arizona Gov. Katie Hobbs’ FY 2027 executive budget calls for a significant increase to the lucky cola casino’s sports betting tax rate, but only for the largest operators. The plan introduces a tiered structure that raises the top rate to 45%.
The budget frames the proposal as a response to market concentration and a growing national push to revisit sportsbook tax policy.
“A handful of large operators [are] capturing the majority of the market,” the document says. “… Low privilege fees and generous tax deductions have allowed these operators to achieve record corporate profits.”
What Hobbs is Proposing
Arizona legalized event wagering in 2021, taxing gaming revenue at 10%. Hobbs’ plan would allow the director of the Department of Gaming “to create a tiered fee structure [that would] more effectively regulate the difference between large and small operators and improve competition.”
The proposed structure has two tiers based on “average monthly revenue”:
- Under $75 million average monthly revenue: current fee of 10% (8% for retail) remains
- Over $75 million average monthly revenue: fee increases to 45%.
“The increased fee would have no impact on Tribal operators,” the budget adds.
It projects the change would increase General Fund revenue, “starting with $145.9 million in FY 2027” and rising to “$202.4 million by FY 2029.”
Key Ambiguity: ‘Revenue’ vs. Handle
The proposal’s headline number is 45%, but the practical impact depends on what the budget means by “average monthly revenue.”
What ‘Revenue’ Usually Means in Sportsbook Math
Sportsbooks typically distinguish between:
- Handle: total dollars wagered
- Revenue/hold: what the operator retains after paying winners (often described as gross gaming revenue or similar)
Arizona Department of Gaming’s (ADG) monthly reporting draws that same distinction. In the state’s monthly event wagering reports, the “Net” line is labeled “Adj Gross Event Wagering Rcpts,” and the report separately lists “Gross Event Wagering Receipts (Wagers).”
Statewide, Arizona reported:
- October 2025 “Net” (adjusted gross receipts before free-bet deduction): $82,958,096.93
- November 2025 “Net” (same measure): $80,854,981.06
That’s the entire market generating roughly $81–83 million in monthly revenue (before promo deductions). If the governor’s threshold is truly $75 million in monthly revenue, it becomes difficult to see how multiple operators would clear it at the same time. The statewide total is only modestly above the trigger in those months.
The FY2025 ADG annual report similarly reports $442,874,773 in “Adjusted Gross EW Receipts Subject to Privilege Fees” for FY2025.
If ‘Revenue’ Means Handle
If the governor’s budget is actually referring to handle when it says “average monthly revenue”, then several operators would exceed the $75 million threshold.
Figures from ADG’s monthly reports show that in October 2025, the mobile handle included:
- FanDuel: $317.1 million
- DraftKings: $293.7 million
- BetMGM: $102.0 million
- Fanatics: $88.2 million
In November 2025, the mobile handle included:
- FanDuel: $313.8 million
- DraftKings: $302.3 million
- BetMGM: $102.5 million
- Fanatics: $84.3 million
The budget text itself is explicit that the trigger is “average monthly revenue,” not wagers. That leaves lawmakers to clarify the metric if the proposal advances.
Where Arizona’s Rate Stands Nationally — and Where 45% Would Land
The executive budget argues that Arizona’s current rate is low. It states: “Arizona’s 10% fee is among the nation’s lowest, with only four states charging lower rates.” These are Nevada and Iowa (6.75%), Michigan (8.4%), and Indiana (9.5%).
It also points to the top end of the national range: “New York, New Hampshire, and Oregon all assess the highest fee of 51%.”
Illinois imposes a graduated tax rate of 20-40% plus a $.25 or $.50 per-wager tax, and operators also pay a local tax of 10.5% to the city of Chicago.
A 45% top tier would put Arizona near the top of the national pack.
Other States Have Raised Sports-Betting Taxes Recently
Arizona’s push follows a wave of state-level increases and new levies in recent years:
- New Jersey: Increased the internet sports wagering tax from 13% to 19.75%, effective July 1, 2025.
- Maryland: The mobile sports wagering tax rate increased from 15% to 20%, effective July 1, 2025.
- Louisiana: Mobile sports betting tax rate rose from 15% to 21.5%, with the law taking effect Aug. 1, 2025.
- Illinois: In 2025, the state introduced the per-bet tax. In 2024, Illinois introduced a graduated tax structure of up to 40% on gaming revenue to replace the previously flat 15%. Chicago’s 10.5% tax went into effect on Jan. 1, 2026.
Last year, Ohio’s Gov. Mike DeWine proposed raising the tax on gross gaming revenue from 20% to 40%, a move lawmakers ultimately removed from the budget. Previously, DeWine successfully pushed for doubling the tax from 10% to 20% in 2023, just months after the legal market launched.
Additionally, there’s a proposal this year in West Virginia to raise the tax rate on sportsbooks from 10% to 25%.
Political and Procedural Challenges Ahead
Even if the policy case gains traction, the proposal may face a difficult legislative path.
Arizona’s constitution requires a two-thirds vote in each chamber for “an act that provides for a net increase in state revenues,” and the provision explicitly includes increases to certain state fees or to “statutorily prescribed maximum limit for an administratively set fee.”
Hobbs’s spokesman, Christian Slater, has argued that the sportsbook charge is structured as a regulatory fee and could pass with a simple majority.
Republicans disagree. The party controls both chambers of the Legislature.
Jeff Weninger, the GOP lawmaker who sponsored Arizona’s original 2021 sports betting legalization bill, reacted sharply to the proposal, saying he believes the increase would still require a supermajority and warning that sharply higher taxes could backfire economically.
“Oh my gosh!” he said of the proposed rate.
He argued that operators would pass higher costs to customers, potentially pushing bettors toward illegal markets and reducing state revenue rather than growing it.
The dispute underscores how difficult the path forward could be — even if the governor frames the move as a way to modernize Arizona’s framework and capture more value from national operators.
Stay updated with GI
Follow Gambling Insider for independent news, analysis and industry expertise.
Gambling Insider delivers the latest industry news, in-depth features, and operator reviews that you can trust. Our team combines rigorous editorial standards with decades of specialized expertise to ensure accuracy and fairness. We are committed to delivering clear, impartial, and dependable coverage across the global gambling sector.