Arizona Doubles Number of Sports Betting Operators: A Wild West Free-For-All

With recent updates from the Arizona Department of Gaming (ADG), Arizona remains on track to launch its mobile sports betting market on September 9, 2021. The NFL season kicks off on September 9 with the defending Super Bowl Champion Tampa Bay Buccaneers hosting the Dallas Cowboys on Thursday Night Football. Tampa is currently favored by 6.5 points in that game, with an over/under of 52.5 points for those keeping track at home. The second draft of sports betting rules released by the ADG presents 20 different event wagering operators to be granted licenses in the state.

Arizona Department of Gaming Updates

Arizona’s 20 event wagering operation licenses will be split between 10 licenses for professional sports franchises/venues and 10 licenses for Native American tribes. It’s unclear how the state will divide the 10 licenses among the 15 Native American tribes. The Arizona Department of Gaming’s second draft of sports betting rules defined event wagering platforms as “the internet interface to a single event wagering system, which is designed to accept mobile event wagers through a website or a mobile application.”

The latest draft of rules from the ADG allows event wagering operators to have up to two skins as part of the same hardware system. However, the ADG intentionally eliminated the word skin to allow for a free market of multiple brands per license holder. The result of this would be one of the most open markets in sports betting in the United States.

Public Comments on ADG’s Rules

After the second draft of rules was announced by the ADG on July 2, there was a round of public comments from sports franchises, sportsbooks, Native American tribes, and other key players in the process. ADG Director Ted Vogt said a refined draft of rules and license allocation proposals would come “shortly thereafter.” Some key questions were raised during this public comment period, informing the changes made to the ADG’s rules and regulations.

There seemed to be some general confusion surrounding the prospect of multiple brands per license holder. For example, Arizona Coyotes representative Andrew Dias asked if his company could have “Coyote Bet” for the NHL team and “RoadRunners Bet” for the AHL affiliate. The ADG responded by saying, “that’s potentially something you could do.” There were also some concerns over the prospect of burdensome manual accounting work and the overly broad definition of a marketing affiliate.

Tax Rates and Licensing Fees

As part of the ADG’s second draft of rules, the tax rates and licensing fees were announced for sportsbook operators in Arizona. The initial tax rates will be 8% on retail wagers and 10% on digital wagers. Sports betting can generate over $427 million in tax revenue across the state per legislative analysts and industry experts. The ADG will enforce licensing, application, and renewal fees as well. Event wagering operators will pay $750,000 for their initial license, $100,000 for the application fee, and $150,000 for the annual renewal fee. For limited operator licenses such as retail-only betting at horse racetracks, there will be a $25,000 charge for the initial license, $5,000 for the application fee, and $5,000 for annual renewal.

Existing Partners Secure Access

In advance of the launch of the exciting sports betting market in Arizona, several national sportsbooks have secured partnerships with professional teams/venues and Native American tribes. Recently, Bally’s has announced a partnership with the WNBA‘s Phoenix Mercury, the first partnership between a professional women’s sports team and a sportsbook in the United States. Also recent is the WynnBet partnership with the San Carlos Apache Tribe, which owns and operates many casinos in Arizona.

Caesars Sportsbook will work with the Arizona Diamondbacks and the Ak-Chin Indian Community, DraftKings is partnering with the PGA Tour, FanDuel is partnering with the Phoenix Suns, and Kindred is partnering with the Quechan Tribe. Penn National Gaming, operator of Barstool Sportsbook, will partner with NASCAR and the Phoenix Raceway. BetMGM is expected to partner with the Gila River Indian Community, which owns three suburban Phoenix casinos. The NFL’s Arizona Cardinals and NHL’s Arizona Coyotes have yet to announce partnerships with sportsbooks, and both will be precious entities in this emerging market.

DraftKings and FanDuel Don’t Have the Upper Hand

In most states where sports betting has become legal, DraftKings and FanDuel have had a built-in advantage in the form of an established consumer base with money invested in their respective platforms from DFS games. However, Arizona has never legalized DFS, so DraftKings and FanDuel don’t have the same upper hand. In addition to what figures to be a highly competitive market, the lack of established brand equity for these two powerhouses will make for an even more open market.

Dan Back, the media director for Better Collective, a sports betting media group, recently said that “every market that’s opened up, it’s FanDuel and DraftKings” who have dominated market share due to their strong “base of players” and “huge account list.” Back called Arizona a “great test case” for “emerging book[s]” who can “look at the market and say, ‘maybe this is our spot where we can really win and focus a lot of our marketing and be more aggressive in trying to grab customer base.”

DraftKings and FanDuel will still have plenty of notoriety as the two big fish in the national sports betting and DFS markets, particularly for devoted sports fans who have partnered with friends in other states to access DFS games and sports bets. However, emerging sportsbooks will have every opportunity to gain consumers in casual fans who are new to sports betting. DraftKings and FanDuel will likely offer significant bonus money offers and signup promotions to new users to counteract a lesser market share than in other states.

With minimal restrictions on event wagering operators, lucrative partnerships up for grabs, manageable barriers to entry, and a market without the built-in dominating presence of heavy-hitters DraftKings and FanDuel, Arizona figures to be one of the most competitive and exciting sports betting markets in the country.