Should I upgrade my phono linestage first or the tonearm for better results?

Ok so seems you like the Graham line in which case going to the Phantom is probably the way to go. I'd think that $3.5K on the phono side does not get you to the ARC PH8 or Tom Evans Audio Groove + (to quote two great choices on the 'Gon both in the $4.5K range) that would be where I'd like to be -- the choices at $3.5K seems rather "meh" to me and I suspect you'd feel the upgrade bug soon again (of course that's just my opinion, I use the two above as they're both stages I have heard and like, I have not heard all the rest)

In other words I'd optimize from the front end forward, you have the table, you have a pretty nice cartridge now optimize the arm and keep moving forward from that (I've always been a source first guy). I've always believed in pushing as far as you can afford on any one piece and then working on having the rest of the system catch up. It may be that at this point in time upgrading your phono to $3.5K would yield a better improvement than the same on the arm but it could be a dead end whereas the arm upgrade could carry you forward to $10K+ cartridges.

I understand that logic.  would you think it makes sense to go to $10k on the cartridge, or is it a diminishing return at some point??

Sure there are diminishing returns but in the context of a six figure system and if you can afford a $10K cart then the Phantom could take it! I’m surely not recommending it as a next step and I’d assume you have upgraded the phono stage commensurately before then. 

My own experience was that only once I upgraded my arm (TriPlanar VII replaced by a Kairos) was it that I really found out what my cartridge (AirTight PC1) could do

Upgrade both very soon for best sound.