While a movie set entirely at Arkham is tantalizing, that really already exists in the Batman: Arkham Asylum video game.
Arkham Asylum isn’t a place that we’ve seen a lot of in any of the Batman films, so it’d certainly help set the solo film apart and show us a corner of Gotham we haven’t really seen.
A film as big as this feels like it should shoot higher than being an adaptation of a video game (albeit, a great video game).
If the report is true then that doesn’t mean that there won’t be any scenes at Arkham – just that it won’t be the sole location for the entire film.