PHOENIX — The numbers are in and Arizonans made big wages on sporting events in the month of October. According to statistics released by the Arizona Department of Gaming, there were $641 million worth of sports bets placed on-site and online in Arizona. That’s a higher monthly total than in more than a year, likely boosted by the presence of the World Series during October.
Ultimately, the state has little to show for it, thanks to the way the state’s sports gaming law is structured. During October, $56 million in bettor losses went to sportsbooks and $3.3 million of that went to “privilege fees,” the tax that betting companies pay to the state.
Why not more money for AZ?
Arizona’s privilege fees amounts to 10% (which make up the vast majority of bets) for online betting companies and 8% for on-site sportsbooks.
However, the state doesn’t even collect that much.
The 2021 sports gaming law— brokered by then-Governor Doug Ducey, Indian Tribes and a bipartisan group of legislators— allows betting companies to write off large portions of their gross receipts for the first five years of the law’s existence. Revenue that would otherwise go back to the state is instead used by sportsbooks for giveaways to bettors, enticing them to bet more.
That means during the state’s first full year of online and retail gaming, the state brought in a total of just $21 million.
“It should be bringing in $50 million a year in receipts to the state. But it’s not even close to that because they get to write off all these free bets,” said Will Humble, executive director of the Arizona Public Health Association and a critic of the deal.
The percentage of write-offs that betting companies enjoy will gradually go down to zero in 2028.
How Arizona compares to other states
Critics have long contended the deal short-changes the state. A spokesperson for the Arizona Department of Gaming pointed out to 12News the revenues collected should not be a surprise because the actual amounts are higher than what The Joint Legislative Budget Committee estimated before the bill was passed.
Although policies differ state-to-state, Arizona’s tax rate for online sports betting operations compares generally to states like Colorado (10%), Iowa (6.7%) and Nevada (6.7%). Ohio’s tax is 20% and Illinois’ tax is 15%. New York and New Hampshire are on the high end at 51%.
For comparison’s sake, Arizona imposes a 16% excise tax, plus standard sales taxes, on marijuana dispensaries.
Arizona could raise annual licensing fees
Critics said the state should recover more revenue from betting companies by raising annual licensing fees they pay. It is currently $150,000.
That would be up to Governor Katie Hobbs’ administration, Humble said.
After the law was passed, opponents also wanted taxpayer advocates to sue the state.
The law gave Arizona sports franchises exclusive rights to sports betting licenses. There was no bidding process, which would have likely brought in much more money to the state.
Humble echoes other critics who say the deal amounted to a violation of the state constitution’s anti-gift clause.
“Where is the Goldwater Institute on this?” Humble said Thursday, speaking to 12News about the libertarian nonprofit. “This is right up their alley. They’re supposed to be a watchdog of gifts and grifts. But they’re quiet as a church mouse over there.”
In response to Humble’s comment, a spokesperson for the Goldwater Institute told 12News they had no comment.
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