Arizona Governor Katie Hobbs wants to cash in on the sports betting market, proposing a significant tax increase affecting the state’s major sportsbooks.
Hobbs last month unveiled her $17.7 billion budget proposal, which includes a call to raise Arizona’s sports betting tax rate to 45% for “large operators” handling at least $75 million each month. All sportsbooks have paid 10% on their revenue since the market launched in 2021, the fifth-lowest rate in the nation.
Three sportsbooks hit the $75 million mark in November 2025:
- BetMGM
- DraftKings
- FanDuel
By raising the rate to 45% on those operators, Hobbs’s proposed budget estimates the state could generate an additional $150 million annually. The Arizona Mirror reported the proposed sports betting tax is part of $950 million of “uncertain funds” the budget relies on to offset federal cuts.
Hobbs, a Democrat, faces an uphill battle in raising the sports betting taxes, according to the Mirror, as both legislative chambers are controlled by Republicans, who are generally tax adverse. Additionally, the Arizona Constitution requires a two-thirds supermajority vote from legislators on laws that increase state revenue. According to Axios, the Hobbs administration contends the sportsbooks pay it as a fee and thus maintains the increase would not require a two-thirds supermajority.
Will other states follow suit this year?
Heading into this year’s legislative sessions nationally, multiple industry sources told iGB they expected a flurry of tax increase proposals to offset growing state budget deficits. West Virginia lawmakers have introduced a bill to take the sports betting tax from 10% to 25%.
Industry sources suggest lawmakers need to be wary of the risk of increasing taxes on the gambling industry as a time when it faces increased pressure from unregulated operators and prediction markets.
“It’s a very unwise time to increase burdens on the companies that are operating within the rules in the state and contributing significant dollars,” industry consultant John Pappas said.
Recent sports betting tax hikes outside Arizona
Multiple governors and legislatures proposed, and passed, sports betting tax increases in recent years.
When Illinois launched sports betting in 2020, it did so with a flat 15% tax. In 2024, lawmakers switched to a tiered tax system ranging from 20% to 40% based on operator revenue.
Last year, Illinois added a per-bet fee starting at 25 cents for the first 20 million wagers. That fee increases to 50 cents per bet after the 20 million threshold. To counter the increased tax burden, sportsbooks implemented a variety of ways to offset the fees.
Illinois Rep Jehan Gordon-Booth warned lawmakers at the National Council of Legislators from Gaming States winter conference to be careful when considering gambling tax hikes.
“Lawmakers need to understand, what you think you’re going to get from raising taxes, you’re not going to get,” Gordon-Booth said. “We want this industry to continue to strike the right balance. This will be a problem in budgets for the foreseeable few years. I don’t want to see us continue to deteriorate the industry.”
In Maryland, Governor Wes Moore proposed doubling the tax rate from 15% to 30%. Ultimately, lawmakers increased the rate to 20% in the final budget.
New Jersey Governor Phil Murphy proposed an increase from 13% to 25%. Legislators increased it to 19.75%.
Louisiana lawmakers increased their tax rate from 15% to 21.5%. At the NCLGS conference in December, Louisiana Gaming Control Board Chairman Christopher Hebert also warned lawmakers, suggesting raising taxes too high could cause operators to leave markets.
In Ohio, Governor Mike DeWine successfully pushed to boost the tax rate from 10% to 20% in 2023. DeWine proposed doubling it again last year, but lawmakers declined to act on the governor’s proposal.
Original article: https://igamingbusiness.com/sports-betting/hobbs-arizona-sports-betting-tax-increase-proposal/
