Arizona Governor Katie Hobbs has proposed a significant increase to the state’s sports betting tax as part of her fiscal year 2027 budget plan. The proposal would raise the tax rate on certain sportsbook operators, with the goal of generating additional funding to support the state budget. The measure is expected to face legislative debate in the Republican-controlled state legislature.
Hobbs introduced a $17.7 billion budget plan that calls for sharply increasing Arizona’s sports betting tax rate for the state’s largest operators.
The proposal would raise the rate to 45% for companies processing at least $75 million in monthly handle. Since Arizona’s legal sports betting market launched in 2021, sportsbooks have paid a 10% tax on revenue, which is currently the fifth-lowest rate nationwide.
In November 2025, three operators surpassed the $75 million monthly threshold: BetMGM, DraftKings, and FanDuel. Under the proposed 45% rate for those companies, the administration projects the state could collect an additional $150 million per year.
If approved, the higher tax rate on major operators such as DraftKings, FanDuel, and BetMGM could have effects for users. Sportsbooks typically adjust their business strategies in response to higher operating costs.
A substantial increase from 10% to 45% on revenue for qualifying operators may reduce profit margins, prompting companies to scale back spending in other areas. One potential impact could be a reduction in promotional offers, such as sign-up bonuses, odds boosts, bet-and-get offers, and ongoing loyalty incentives.
In other states where sports betting taxes have increased, operators have at times trimmed promotional budgets or adjusted pricing structures to offset added expenses.
While no specific changes have been announced in Arizona, bettors could see fewer or less generous promotions if the higher tax rate takes effect.
The proposed tax increase will be debated as part of Arizona’s broader budget negotiations for fiscal year 2027.
Lawmakers in the Republican-controlled legislature will review the governor’s $17.7 billion spending plan in the coming months, with committees expected to examine revenue projections and the feasibility of the proposed 45% rate on high-volume sportsbooks.
Under Arizona law, revenue-raising measures typically require a two-thirds majority vote in both chambers. However, questions remain about whether the proposal would be structured in a way that requires a supermajority or could pass with a simple majority. That procedural issue could play a key role in determining its path forward.
Arizona’s fiscal year begins July 1, meaning lawmakers generally aim to finalize the state budget before the end of the legislative session in late spring or early summer. Until a final budget agreement is reached and signed, the future of the sports betting tax increase remains uncertain.
