In April, Arizona Governor Doug Ducey signed a bill legalizing both retail and online sports betting. This legislation makes available a total of twenty sports betting licenses, ten of which are reserved for tribes.
Arizona will tax retail sports gambling at 8% and online sports gambling at 10%. These modest rates encourage Arizonans to support the new industry as shown by a Copenhagen Economics study concluding that tax rates of 15% and higher reduce betting activity.
Furthermore, low taxes on sports betting reduces the incentive of placing a bet for a lower fee on the $150 billion black market for sports betting, rather than through legal means.
Arizona’s proposed rates are competitive, but setting a tax rate lower than 8% could help Arizona compete with neighboring states such as Nevada, where bets are taxed at 6.75%.
Despite many positive aspects of the Arizona Department of Gaming’s proposal, the language regarding the regulation of league data usage could amount to a giveaway to sports leagues. The Department’s regulations state that official league statistical data must be used for in-game betting unless the sports book proves that the use of other data is “necessary”. Sports books should not have to justify the use of non-official data as necessary as long as the information is good and comparable.
The department says even though they are making sports books use “official” data, that they will make sure the costs are “commercially reasonable.” Yet, they would interfere in the market, which would determine commercially reasonable prices for free – if allowed to function. This language should be eliminated from the regulations, or at minimum, be rewritten to allow sports books to use statistics which are sufficient for integrity, rather than defaulting to using league-approved data.
A low tax approach deserves support, and should provide optimism for consumers and the industry’s economic prospects. With most states not mandating using league-approved statistics, and not facing any unique integrity issues as a result, there is little justification for requiring operators use that data only for in-game betting.