Arizona Targets Large Sportsbooks With Proposed 45 Percent Tax

Arizona sports betting policy is back under review as state leaders weigh whether the market should contribute a far larger share of revenue to the budget.

Good to Know

• Arizona may raise taxes only on high volume sportsbooks
• The proposal targets operators handling at least $75 million monthly
• A supermajority vote could determine the outcome

Four years after Arizona launched regulated sports betting with one of the lowest tax rates in the country, the state could be heading toward one of the highest rates for its largest operators.

Governor Katie Hobbs included a sports betting tax overhaul in her $17.7 billion budget proposal released last month. The plan would raise the tax rate to 45 percent for sportsbooks that handle at least $75 million per month, while leaving smaller operators untouched.

Since market launch in 2021, all sportsbooks have paid a flat 10 percent tax on revenue. That rate ranks as the fifth lowest nationwide.

Only three operators currently meet the proposed threshold, based on November 2025 figures:

1. BetMGM
2. DraftKings
3. FanDuel

According to budget estimates, applying the higher rate to those operators alone could generate an additional $150 million per year. The Arizona Mirror reported that the sports betting tax increase forms part of roughly $950 million labeled as uncertain funds intended to offset potential federal funding reductions.

Political hurdles remain significant. Hobbs, a Democrat, must navigate a legislature controlled by Republicans, who historically oppose tax increases. Arizona Constitution also requires a two thirds supermajority vote for measures that raise state revenue.

The Hobbs administration argues the sportsbook payments qualify as fees rather than taxes. According to Axios, that interpretation could allow lawmakers to bypass the supermajority requirement, though that position is likely to face legal and political scrutiny.

Arizona proposal fits within a broader national pattern. Over the past several years, governors and legislatures across the country have revisited sports betting tax structures after markets matured and revenues stabilized.

Recent sports betting tax actions in other states include:

Illinois

• Launched with a 15 percent flat tax in 2020
• Shifted in 2024 to a tiered structure ranging from 20 percent to 40 percent
• Added a per bet fee of 25 cents on the first 20 million wagers and 50 cents beyond that threshold

Maryland

• Governor proposed doubling the rate from 15 percent to 30 percent
• Legislature approved a final increase to 20 percent

New Jersey

• Governor proposed raising the rate from 13 percent to 25 percent
• Lawmakers settled on 19.75 percent

Louisiana

• Increased the tax rate from 15 percent to 21.5 percent
• Gaming Control Board Chairman Christopher Hebert warned excessive hikes could push operators out

Ohio

• Raised the rate from 10 percent to 20 percent in 2023
• Lawmakers rejected a subsequent proposal to double the rate again

Arizona lawmakers have not yet scheduled formal hearings on the proposal. Any movement will likely unfold alongside broader budget negotiations in the coming months.