Arizona’s highest-grossing sportsbooks could face some of the nation’s most onerous tax rates if a proposed budget provision is passed this year.
- Arizona Gov. Katie Hobbs proposed raising the sports betting tax rate to 45% for the state’s highest-grossing online sportsbooks, up from the current 10%.
- The proposed increase would apply only to FanDuel, DraftKings, Fanatics, and BetMGM, potentially generating $150 million to $175 million in additional annual tax revenue.
- The plan faces uncertainty in the Republican-controlled legislature and reflects a broader national trend of states raising sports betting taxes.
The top-earning sportsbooks would pay a 45% tax on their adjusted monthly gross gaming revenue, compared to the current 10% rate, if lawmakers agree to a budget item introduced by Democratic Gov. Katie Hobbs. The 45% would be the second-highest rate among the 31 states with competitive legal statewide mobile sports betting markets, behind only New York (51%).
The tax rate would only apply to FanDuel, DraftKings, Fanatics, and BetMGM as of last November, the most recent month with publicly available Arizona sports betting data. Arizona has 14 licensed mobile sports betting platforms.
Retail sportsbooks, which pay an 8% rate on gaming revenue, would not be impacted. Online sports betting makes up more than 90% of the state’s betting handle.
“As the industry changes, it is clear that not all operators are alike, with a handful of large operators capturing the majority of the market,” the governor said in the proposed budget documents. “Low privilege fees and generous tax deductions have allowed these operators to achieve record corporate profits.”
Hobbs’ budget plan still needs to earn two-thirds support in the Republican-controlled legislature. Republicans have typically opposed corporate tax increases, and it remains to be seen whether the governor’s proposal can garner enough support to be incorporated into the budget.
Tax details
The plan appears to implement an unusual fee set that applies to operators that reach a specific handle threshold but is based on their revenue.
If approved, a tiered structure would be applied to “large” operators generating $75 million or more in monthly revenue. When adjusted for free bets and other promotions that sportsbooks can deduct from their tax liability, the 14 sportsbooks combined generated $54.4 million in revenue in November.
DraftKings and FanDuel led the way with roughly $22 million in adjusted revenue apiece, far ahead of third-place BetMGM. No individual operator has ever made more than $75 million in revenue in a single month since Arizona began legal sports betting in 2021.
Arizona sports betting tax increase included in Gov. Katie Hobbs' upcoming budget proposal; if adopted, the highest-grossing operators (FanDuel and DraftKings) would pay one of the highest effective sports betting tax rates in the country pic.twitter.com/tm0oodG4fT
— Ryan Butler (@ButlerBets) February 10, 2026
The proposal projects nearly $150 million in additional annual revenue if the tax increase passes; since a tax on revenue would generate no money, the budget appears to refer to operator handle.
A 45% graduated tax on revenue applied to the sportsbooks that generated more than $75 million in handle in November would have meant around $17 million in additional taxes. Extrapolating across 12 months, and adjusting for seasonal fluctuations in sports betting revenues, the state would generate between $150 million and $175 million in additional taxes in that span, in line with the governor’s projections included in the budget.
FanDuel and DraftKings are the only two Arizona operators that consistently clear $75 million in handle during the summer months when sports betting handle typically drops compared to the heavily bet fall football season.
Nationwide trends
Hobbs’ budget pitch comes as other states have raised sports betting taxes in the past two years.
Illinois introduced the nation’s first tiered rate, raising taxes from a flat 15% fee to a graduated rate topping out at 40%. In 2025, the state also implemented the nation’s only per-bet tax fee.
Delaware, the first state to accept a legal single-game sports bet outside Nevada, raised the rate on its lone operator, BetRivers, to 50%. New Jersey, the second to take bets, increased its fee from 14.25% to 21%.
Louisiana, Maryland, and Washington D.C. also passed increases. At least a half-dozen states have considered betting tax rate rises in the past couple years.
The state-level tax increases come as gamblers face a significant increase in their federal burdens. A 2025 federal law will reduce the amount gamblers who itemize their gambling earnings can deduct, from 100% to 90%, a shift that could effectively double the effective tax rate for high-volume bettors.
