Published on: February 9, 2026, at 04:30h.
Updated on: February 8, 2026, at 09:52h.
- The governor suggests a 45% tax for specific operators
- The current internet sports betting tax rate in the state is 10%
- Similar to Illinois, the proposal focuses on the largest operators
In her quest for increased revenue, Governor Katie Hobbs (D-AZ) aims to elevate Arizona’s sports betting tax to 45%, over four times the existing rate of 10%.
Her proposed fiscal 2026 budget of $17.7 billion includes a measure that, if enacted, could enhance state income from online sports betting by $145 million. Arizona launched online sports wagering in 2021 and has quickly established itself as one of the fastest-growing markets for this betting type in the United States.
Arizona was among the states that swiftly surpassed $1 billion in total revenue and one of the first to achieve $15 billion in combined wagers. The proposed budget must be enacted before the beginning of the fiscal year 2026 on July 1.
Similarities to Illinois in Hobbs’ Proposal
According to guidelines from the Arizona Department of Gaming (ADG), a maximum of 20 sportsbooks may operate in the state. However, the Hobbs proposal resembles the Illinois plan by stating that the 45% tax rate would target online sportsbooks generating at least $75 million in monthly revenue.
In other words, if Governor Hobbs’ tax plan is approved, it would primarily impact substantial operators such as Caesars Sportsbook, DraftKings, Fanatics, and FanDuel, based on current trends.
This approach mirrors the recent tax increases seen in Illinois, where lawmakers introduced a progressive tax structure in 2024 that required larger operators, like DraftKings and FanDuel, to pay a higher tax rate compared to smaller competitors.
Last year, Illinois also instituted a new fee of 25 cents per wager for the first 20 million bets placed, which increased to 50 cents for each wager beyond that initial count, primarily affecting the larger operators.
Arizona’s Potential Rise in Sports Betting Taxation
With numerous states recognizing the value of sports betting as a vital revenue stream, Louisiana, Maryland, New Jersey, and Washington, DC have joined Illinois in raising associated tax rates. However, it remains uncertain whether Governor Hobbs possesses the political leverage necessary to more than quadruple the sports betting tax, particularly given that both chambers of the state legislature are Republican-controlled. Additionally, she is up for reelection this year.
If Hobbs’ proposal becomes law, Arizona would transition from one of the lowest sports betting tax rates nationwide to one of the highest. Only Delaware, Illinois, New Hampshire, New York, Oregon, and Rhode Island impose internet sports wagering taxes exceeding 45%, as reported by The Tax Foundation.