Arizona iGaming Would Boost Tax Revenue Given the Success of Sports Betting

Arizona iGaming Would Boost Tax Revenue Given the Success of Sports Betting
By Bill Ordine
Fact Checked by Ron Fritz

At first glance, the swift, efficient manner in which Arizona sports betting sites launched, both retail and online, in 2021 would seem to bode well for a further expansion of digital gambling, namely to iCasino. Those are casinos games, such as slots and table games, available on computers and mobile devices.

Regarding sports wagering, in April 2021, Arizona Gov. Doug Ducey signed the state’s sports gaming law. By September, live and online sportsbooks were taking bets. That timeline is considered speed-of-light in the sports betting regulatory process universe.

Primarily, pro sports entities (NFL Arizona Cardinals, MLB Arizona Diamondbacks, the PGA, NASCAR, and others), as well as many Native American casinos throughout the state, have partnered with familiar national online sportsbook operators to offer sports gambling.

So, what does that say, if anything, about the leap to iCasino, where unquestionably, there is much more money at stake?

A report recently released by gaming company Light and Wonder and prepared by gaming research organization VIXIO GamblingCompliance projected revenues for gaming states if they were to legalize iCasino, also known as iGaming.  In the case of Arizona, the report pegs potential iCasino gross gaming revenue at $805.6 million a year and potential tax revenues at $161.1 million annually — which presumably would also include contributions to Tribal governments — based on a 20% tax rate.

State iGaming GGR Potential iGaming Tax Revenue Potential
Arizona $805.6M $161.1M

Source: VIXIO GamblingCompliance


Strong Start for Arizona Sports Betting

Looking back at 2021, Arizona betting apps did about $161 million in revenue from inception to year-end and was the fifth best sports betting market in the U.S. during the fourth quarter, the most active quarter of the year for sports gambling. 

However, referring back to the Light & Wonder/VIXIO projection for iCasino in Arizona, the average revenue per quarter would be about $200 million a quarter, assuming the report’s hypotheticals hold up.

Along with the sports betting law that Ducey signed, there was a concurrent new compact for Tribal casinos. That compact allowed for the expansion in those casinos to Las Vegas-style gambling, such as roulette and craps. Previously, the state’s Tribal casinos were limited to electronic gaming devices, generally slots, plus some card games, such as blackjack.

Moving ahead on Arizona online casinos presents navigating a more complex landscape than in some other states. For instance, it may involve Tribal casinos partnering with national gaming companies. That’s not always a comfortable fit.

More on Tribal Gaming

Speaking on an iCasino panel at a gaming conference earlier this year, Saverio “Sal” Scheri, the chief operator officer for Agua Caliente’s three California casinos, discussed how that may work out for Tribal casinos.

Tribal casinos may be offered a big upfront payoff and the national company may pay for licensing fees and provide marketing plus provide its national-brand association, he said, but the Tribe may be limited to 2% to 3% of revenues for 10 to 15 years. Also, the established Tribal casino is making available a database of customers built over years of being in business.

The contrast in vision is also at issue. Commercial companies have a long-term look-forward of perhaps five years. That may be a long time for a corporation, but Tribes think in terms of generations, such as the “grandchildren of your grandchildren,” Scheri said.

“We run the risk of entering a partnership that doesn’t end well and let’s not overlook how many times that has happened,” he said.

Continuing, Scheri noted, “That’s left such a bad taste for the Tribal gaming world where they say … we don’t want to go down that path because we were burned so many times.”

Tribal interests have a great deal at stake in the bricks-and-mortar casinos they’ve built and the actual jobs that an actual casino provides are important.

Could Michigan be a Guide for Arizona?

Meanwhile, it’s also fair to note that one of the six states that have legalized full iCasino, Michigan, does have both commercial and Tribal casinos. Yet, that experience may be too brief to draw conclusions.

In the end for Arizona, merging the financial aspirations of the publicly traded corporations that are the likely leaders in iCasino and the interests of Tribal Nations where the obligations are in roads, schools and health services, can be tricky. Tribal interests may want to go it alone in iCasino, or at least maintain the status quo until they can feel secure about partnerships.

The state did just about everything right in being able to launch in time to bet on the NFL in Arizona. Will the timing be the same of iCasino eventually?

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Contributors

Bill Ordine is a writer for BetArizona. He was a reporter and editor in news and sports for the Philadelphia Inquirer and Baltimore Sun for 25 years, and was a lead reporter on a team that was a finalist for the Pulitzer Prize in Breaking News. Bill started reporting on casinos and gaming shortly after Atlantic City’s first gambling halls opened and wrote a syndicated column on travel to casino destinations for 10 years. He covered the World Series of Poker for a decade and his articles on gaming have appeared in many major U.S. newspapers, such as the Los Angeles Times, Chicago Tribune, Miami Herald and others.

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