Hobbs wants a bigger share of Arizona sports gambling revenue. Is that feasible?

It’s Super Bowl week! And while the game won’t be in Arizona this year, a good share of the betting will be.

Last year, Arizonans spent more than $8 billion on sports gambling and as the business continues to grow, state leaders want a bigger piece of that growing pie to fill major budget gaps.

Right now, the state gets only about 10% of taxable revenue from those popular sports betting sites, which make up the majority of Arizona’s gambling action.

In Gov. Katie Hobbs’ proposed budget, she’s calling for that rate to be raised to 45% in order to add another $150 million to the state coffers. But is that realistic?

Daniel McIntosh is a marketing professor in the sports business program as part of Arizona State University’s W.P. Carey School of Business.

“Gov. Hobbs is suggesting we increase it from 10% to 45%, but is specifically carving that out only for casinos that are operating at over $75 million a month. And so currently in the state, only four really meet that,” McIntosh said.

Those four are Draft Kings, Caesars, Fanatics and Fan Duel, which account for about three-quarters of the betting market.

Arizona’s current sportsbook tax rate is fifth lowest in the nation for states that approved online sports gambling. New York, Oregon, Rhode Island and Illinois go as high as 50%.

“At 10%, we are at the very low end of where we could be,” McIntosh said.

The tax rate increase would not apply to Arizona’s brick and mortar casinos, only on the online sportsbooks that take in the majority of the money.

“Margins for these casinos are pretty small, it’s usually in the world of 2% to 3% of what they’re making as profit. So it is a substantial net for their cashflow operations. But remember a lot of these are operating digitally, so they don’t have a physical footprint in the state. A lot of those dollars then make their way to Las Vegas or New York or wherever their headquarters are,” McIntosh said.

Sports betting has exploded since the 2018 Supreme Court decision legalizing regulated operations outside of Nevada. According to the website Legal Sports Report, more than $600 billion has been wagered nationwide since.

In 2025 alone, Arizona accounted for more than $8.5 billion.

McIntosh, who takes part in the school’s economic impact studies for major events like the Super Bowl, says it is feasible to expect more revenue from this growing industry.

“It is a very substantial amount of money that is changing hands. I don’t have a problem with the government increasing the tax rate on the operators to better the lives of the citizens in the community who are spending those dollars.”

But there may be a bigger problem to solve first: Saving the integrity of the games to bet on.

A series of recent scandals in the NBA, MLB and even in college athletics have exposed vulnerabilities in the system, mostly when it comes to what are called prop bets, enabling gamblers to wager on individual athletes.

McIntosh finds them problematic, potentially alienating lifelong fans who wager on individual players’ statistical outputs.

“Let’s say I’m a huge Devin Booker fan and I think he’s going to score 20 points and he only scores 19. The Suns win by 25, but Devin Booker got only 19. We can have a subset of fans that are unhappy with the outcome of the game," McIntosh said.

And McIntosh believes it may ultimately backfire.

“It drives increased engagement, but does it drive increased avidity? What are the impacts to the long term development of our fans, our fan bases, and what are some of the negative externalities?” McIntosh said.

“Players are very active on social media, as they should be. But some of them will admit after a bad game they cannot go on social media because of the negative, blowback, the negative comments.”

He feels there needs to change, especially in what’s allowed for prop betting to save the integrity of the games themselves.

“And we're already seeing that in baseball, right? When you've got a pitcher that's spiking pitches on the first one and whether it has any impact on the outcome of the event itself, it's having an impact on the integrity or the perceived integrity of the game,” McIntosh said.

Raising the tax rate on sportsbook revenue in Arizona though could face major obstacles.

Tax-averse Republican lawmakers at the state Capitol have traditionally been opposed to any form of increase, and the state constitution requires a two-thirds supermajority from legislators for laws that elevate state revenue.