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Sports Betting Could Bring Millions in New Tax Revenue to Arizona Despite Criticism for Governor Ducey’s Policy

According to estimates of industry analysts, the legalization of sports betting in Arizona could generate over $3 billion in bets and over $200 million annually for local sportsbooks once the market becomes fully operational.

Sports betting could become accessible in the state by the end of 2021 thanks to a piece of legislation that the state Legislature passed in mid-April and later signed into law by Arizona Governor Doug Ducey. Once the new tribal gaming compacts that are associated with the new sports betting legislation are approved by the US Secretary of the Interior Affairs, legal sports betting will become available in the state.

National analysts expect Arizona to become a flourishing market for sports betting, especially considering the fact that the newly-passed legislation contains several key elements, including mobile betting. As it has already been revealed, mobile gambling services will be offered by the ten tribal sportsbooks and the ten sportsbooks that are set to be operated by professional sports teams in the state.

According to experts, that is good news, as it could be found attractive by more customers, who will be able to bet wherever they are, whenever they want to. On the other hand, mobile sports betting and remote registration services could help Arizona get ahead of states that have still not allowed this form of gambling.

Arizona Legislature’s Budget Committee Expects About $15 Million in Annual Revenue from Sports Betting

As mentioned above, analysts have said that based on the population of Arizona and the current visitor trends, about $3 billion in bets could be generated every year once the state’s sports betting market is mature, which is likely to happen in its third year of operation. When it comes to Arizona sportsbooks’ expected revenue, it should be about $225 million a year, experts say.

Under the legislative measure that was already passed by state lawmakers, sportsbooks in Arizona will be taxed under the 8% tax rate that applies to tribal casinos. That tax rate, however, could change in case other conditions are agreed upon in the tribal casino compacts.

Previously, the Joint Legislative Budget Committee at the state Legislature, which is entitled with the analysis of the expected financial effect of proposed laws, provided an estimate that legalization of sports betting will generate annual revenue of about $15 million from sportsbook license fees and taxes for the state’s general fund. However, other analysts have challenged these estimates, saying that the actual tax accumulations cannot be calculated because of the bill’s amendments under which gamblers will be given free bets.

The implementation of so-called free bets could be a gamechanger, as it would most likely reduce the effective tax rate. In other words, the state would receive less money because free bets would help operators offset some of their revenue and would be great for punters, but it is likely to open a serious gap between the revenue generated by local sports betting operators and the taxes paid to the Government.

According to analysts, Arizona sportsbooks are likely to take advantage of this situation to the maximum extent possible. However, it must be noted that operators will be allowed to deduct only 20% of their revenue, as promotions in their first two years of operation. That figure, however, is being cut, and in a few more years deduction of no more free bets from the companies’ tax liability will be allowed.

Governor Ducey Agrees on New Gambling Compacts with Arizona Indian Tribes

The massive gambling expansion of Arizona has triggered some controversy and criticism over the years.

Previously, campaigners had raised a red flag regarding the possible negative effects that could occur as a result of the planned gambling expansion, citing various reasons, including unscrupulous operators and their alleged ties to criminal organizations. According to some opponents of the new form of gambling, legalizing more gambling services in the state would require better protection for local consumers.

However, despite opposition, Governor Doug Ducey signed new compacts with representatives of the 16 tribal nations to finally give the green light to a broader gambling expansion in the state. He needed the passage of one of two similar bills, called House Bill 2772 and Senate Bill 1797 in order to make sure off-reservation sports betting services are to be legalized in the state.

As CasinoGamesPro reported at the time, the deal allows the Indian tribes to open four new casino venues, operate much more slot machines and add some new table games. Furthermore, they will be able to add over 500 slot machines every two years. Under the provisions of the law linked to the compact amendments, electronic keno, sports betting and betting on daily fantasy sports will also become legal.

Although the full effect of the new compact deal is not expected to be actually felt in Arizona for several years, they will still be generating millions of dollars for the state’s general fund. According to the Governor, the agreements are a win-win for the state and the tribes but also for local taxpayers.

The deals with the 16 tribal nations were also important in order to prove that all tribes are placed on equal footing with the state.

Governor Ducey’s “Legacy Project” of Sports Betting and Tribal Compacts Renewal Draws Criticism

The administration of Governor Ducey has worked extremely hard on the legalization of sports betting and the tribal compact agreements, which is why this project has been considered his legacy project.

Presumably, the main reason why the Governor has worked so long in that direction is money, with him being aimed at bringing fresh monetary flow to the state. Normally, that would make it possible for the state to boost its spending without raising taxes, or initiate a tax reduction. However, the Governor has not done any of this and proposed a change that would minimize the portion that will be received by the state as a result of the legalization of sports betting operations.

HB 2772 gave the green light to a total of 20 sports betting operations in the state – 10 off-reservation licenses and 10 licenses for the local Indian tribes. The ten off-reservation permits, however, were limited to current professional sports organizations and their payments will be negotiated with the Department of Gaming. This faced some criticism, as the move will result in limited competition, which on the other hand, will bring considerably less money to the state.

Some proponents of the expansion claim that both the tribes and professional sports organizations have taken advantage of the situation and Governor Ducey was played into fighting for the expansion that would not be much beneficial for the state.

The Governor has been claiming that the major expansion of the local gambling sector will not change the culture of the state in any way but this is not entirely true. The new compacts will provide reservation casinos to get full Las Vegas-style operation equipment, as they will no longer be limited to offering only slots and few card games. On the other hand, professional sports teams will receive a fresh income stream thanks to their sports betting operations, and many sports fans are expected to become interested in the new form of gambling.

 Author: Harrison Young

Harrison Young is an experienced writer, who started his career almost 8 years ago. Prior to joining our team at CasinoGamesPro, he worked as an editor for a small magazine.