Arizona sportsbooks hit record $648.2 million handle in October, but state revenue lags behind

In October, Arizona's sportsbooks reported a handle of $648.2 million, marking the state's second-highest total in 26 months of legal wagering. This significant growth is attributed to the presence of the World Series during the month, contributing to a higher monthly total than in over a year.

The Arizona Department of Gaming provided the statistics, revealing a 5.1% increase in sports betting handle compared to the previous October, bringing the total for the calendar year above $5 billion. However, despite the impressive numbers, the state's sports gaming law structure has limited its revenue gains, reports 12News.

While October's bettor losses reached $56 million, only $3.3 million went to "privilege fees," the tax paid by betting companies to the state. Arizona's privilege fees stand at 10% for online betting companies and 8% for on-site sportsbooks.

However, the 2021 sports gaming law allows these companies to write off substantial portions of their gross receipts for the first five years, diverting revenue that would otherwise go to the state, for promotional giveaways to bettors. That means during the 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,” Will Humble, executive director of the Arizona Public Health Association and a critic of the deal, was quoted as saying in the report.

The law, negotiated by former Governor Doug Ducey, Indian Tribes, and legislators, granted exclusive sports betting licenses to Arizona sports franchises without a bidding process, potentially limiting revenue opportunities. However, the percentage of write-offs that betting companies benefit from is set to decrease steadily, reaching zero by the year 2028.

Critics argue that the agreement does not adequately benefit the state. A representative from the Arizona Department of Gaming emphasized to 12News that the revenues collected should not be unexpected, as they surpass the estimates initially provided by The Joint Legislative Budget Committee before the bill's passage.

While tax rates for online sports betting operations vary from state to state, Arizona's rate aligns with those of other states such as Colorado (10%), Iowa (6.7%), and Nevada (6.7%). Ohio imposes a higher tax rate of 20%, while Illinois has a tax rate of 15%. On the higher end, New York and New Hampshire have elevated tax rates at 51%. In contrast, for the sake of comparison, Arizona levies a 16% excise tax in addition to standard sales taxes on marijuana dispensaries.

Critics argue that the state could increase its revenue from betting companies by raising the current annual licensing fee, which stands at $150,000.

In terms of sports betting operators, DraftKings secured the top spot in October for both handle and gross revenue for the first time since December 2021. DraftKings' $220.6 million in accepted wagers, its second-best in Arizona, outpaced FanDuel by $320,257. However, FanDuel had a lower spend on promotions and bonuses, resulting in a narrower gap in adjusted revenue.

BetMGM claimed the third position with a $90.4 million handle and $9.2 million in gross winnings, maintaining a streak of double-digit holds. Caesars, ESPN Bet, BetRivers, Golden Nugget, WynnBET, and TwinSpires are also featured in the Arizona sports betting landscape, with varied outcomes in handle and revenue.