Arizona Legislation Expands Gaming to Include Sports Betting, Fantasy Sports, Keno, and Mobile Lottery Games

By Eric L. Kintner and Heidi McNeil Staudenmaier

On April 15, Governor Ducey signed into law the greatest expansion of the Arizona gaming landscape in nearly two decades. The new law, along with amended Tribal-State Gaming Compacts, legalizes event wagering (sports betting), daily fantasy sports contests, keno games, both on and off reservations in the State, as well as a statewide mobile lottery draw game. The gambling expansion bill will become effective following approval of the Compact amendments by the U.S. Secretary of the Interior and publication in the Federal Register, which could happen sometime this summer.

Sports Betting Expansion

House Bill 2772 and Senate Bill 1797 permit event wagering (which includes collegiate and professional sporting events as well as e-sports and Olympic events) on Tribal lands at the Tribal casinos.  The bills also permit entities located off Tribal lands to apply for event wagering licenses and offer limited sports books and statewide mobile event wagering.  The event wagering licensed entities will include professional sports franchises and Tribes, with up to 10 licenses awarded to Tribes and up to 10 licenses awarded to Arizona professional sports teams.

The Phoenix Suns and FanDuel have announced a new partnership to open a sportsbook at the Phoenix Suns Arena.  The Professional Golf Association and DraftKings have also announced plans to operate a year-round sportsbook at TPC Scottsdale, home of the Waste Management Phoenix Open.  In addition, the new law authorizes up to 10 limited event wagering operator licenses at licensed racetracks or off-site betting sites that have partnered with an event wagering operator to offer sportsbooks at their locations.

The Arizona Department of Gaming (ADG) will continue to regulate Tribal gaming operations (along with the Tribal regulators).  ADG is also authorized to oversee the off-reservation gaming within the State.  ADG will be responsible for administering and managing the event wagering license (as well as related operator, management services and supplier license) application process.  A non-refundable license fee will be required with the initial license application, with that fee yet to be determined by ADG.  Details concerning the application and licensing process will be part of the ADG rule-making process.

The new law will permit individuals who are at least 21 years of age to place bets by phone anywhere in the State (although it’s unclear how mobile wagering will be handled on Tribal lands).  The online betting sites would permit wagering on everything from professional sports to collegiate games.  “Proposition bets” would be allowed on professional games.

Legalized Daily Fantasy Sports

Prior to the new gambling expansion bill, Arizona’s gambling laws were some of the most restrictive laws in the United States and arguably prohibited wagering on fantasy sports contests, including daily fantasy sports contests.

Under the new law, “fantasy sports contests,” including daily fantasy sports contests, will be formally legalized in Arizona.  Fantasy sports contest operators may apply for a license from ADG.  Non-licensed operators may conduct limited fantasy sports contests of up to 15 players, but are limited to collecting no more than $10,000 in total entry fees per year and must keep no more than 5 percent of the fees.  Fantasy sports contests kiosks generally will be permitted at only limited locations of certain fraternal or veterans' organizations or licensed racetracks.  As is the case with event wagering, the ADG rule-making process will address further details for the application process and fantasy sports contest rules.

Expanded Gaming for Fraternal and Veterans' Organizations

Certain fraternal and veterans' organizations, such as the American Legion, Elks Club and VFW Halls, previously were able to offer traditional raffles, pull tabs, and other certain forms of limited games.  The new law will give these organizations the exclusive right to offer electronic keno games on their premises (provided they are located at least five miles from a Tribal casino). Limited off-track betting sites also will be permitted to offer electronic keno.  The Arizona Lottery ultimately will be responsible for running the electronic keno and mobile draw games and providing the winning numbers.

Tribal-State Compact Changes

On April 15, Governor Ducey also signed Tribal-State Compact amendments that will let Tribes expand their Class III game offerings, including permitting  certain Tribal casinos to operate a greater number of slot machines.  The amended Compacts also permit several new tribal casinos in the Phoenix, Tucson and Flagstaff metropolitan areas.

In exchange for the Tribes’ continued exclusivity of Class III gaming in the State—other than the limited exceptions for off-reservation gaming—the Tribes will continue to pay revenue sharing to the State.  The State also will benefit from revenue sharing paid by the off-reservation gaming venues for event wagering, daily fantasy sports contests, and keno.

Conclusion

Both the State and the Tribes are betting that additional Tribal casinos and expanded Class III gaming will lead to more Class III Net Wins – resulting in a win-win situation for all in terms of greater revenues for the Tribes and increased revenue-sharing to the State.  The Senate Fiscal Note (prepared in support of the Arizona legislation) projects the expanded gaming will generate $34.2 million in annual general fund revenue by 2024.  The Compact Amendments will extend the existing Compacts for 20 years, which provides the Tribes and the State with more certainty as to expected revenues.

Sports betting legislation has been proposed in Arizona numerous times over the years.  It seems that 2021 may be the year that sports betting finally becomes a reality.