Higuain is expected to leave the Bernabeu this summer after revealing his intention to depart at the end of last season, having endured a constant battle to command a consistent starting place during his six years in the Spanish capital.
Juventus were initially considered the favourites to sign the Argentina international but have since drifted out to 2/1, with the online bookmaker now rating the Gunners at 4/9 to secure his services.
Any deal would likely see Arsenal break their transfer record, which currently stands at around £15m for their acquisition of Andrei Arshavin, with Madrid expected to want around £30m.
It also remains to be seen what the intentions of Jose Mourinho's replacement will be, with PSG boss Carlo Ancelotti currently the heavy favourite to get the job.
Sky Bet Football Trader Chris Spicer said: "Widespread reports suggest that Arsenal are trailing Higuain and our punters seem convinced that Arsene Wenger will break from his stringent approach to transfer dealings and spend big.
"Juventus had been as short as 2/9 to secure his services as they look to add a prolific striker to their title winning side but are now considered second favourites in what is considered a two-way battle."