To review a skill machine location agreement in Texas, confirm who owns each machine and holds each Comptroller credential, test the revenue split against the 50 percent cap, then check collections, credit, exclusivity, exit and indemnity terms. The agreement allocates money and duties between the parties. It does not make a machine lawful.
Signing does not settle legal status. Occupations Code Sec. 2153.003 says Chapter 2153 does not authorize a machine prohibited by the Texas Constitution or Penal Code, and Local Government Code Sec. 234.140 says game-room licensing is no defense to a Chapter 47 prosecution. The wider picture is unsettled. The Sixth Court of Appeals affirmed a Fannin County trial court's skill finding 2-1 in 2025, and the Dallas Morning News reported Justice Jeff Rambin's emphasis on deference: "The trial court heard the evidence in person" and "We did not. That matters." Attorney General Opinion KP-0520 (June 10, 2026) says a machine with chance and skill modes is a gambling device "so long as chance plays any role in determining whether the player receives something of value, regardless of the presence of skill," as quoted by Legal Newsline. Public Gaming reports that AG opinions do not bind Texas courts.
The steps below separate sourced requirements from our recommendations. Use them with Texas counsel.
1. Name the parties and machines
"Operator" is a trap. Sec. 2153.002 defines an operator as a person who exhibits a machine, or permits its exhibition, in a place of business the person does not own. Comptroller Rule 3.601 says "bailee or lessee (location operator)." Trade usage often means the route company.
Recommendation: identify the machine owner, route company, venue, landlord and software vendor by role. Schedule machines by make, type and serial number, items that match Sec. 2153.202 records. State which party holds which credential. The Comptroller says general business license holders may place machines in another person's business, while a registration certificate covers machines kept only in the holder's own business. Also look for the statement Sec. 2153.204 requires in a written contract between a licensed owner and an operator: the Comptroller's name, mailing address and telephone number.
2. Check term, renewal and the venue lease
Chapter 2153's section headings include none on term or renewal, so treat these as negotiated points. Recommendation: check initial length, automatic renewal, notice windows, and whether the term survives a sale or move. Match the term to the venue's lease, then check that lease's use clause and any landlord consent requirement.
3. Separate the exits
Recommendation: address termination for convenience, cause, nonpayment and legal events separately. Cover notice, removal timing, removal cost and unamortized advances. A legal-event clause should reach state law, AG opinions, prosecutor action, local bans and zoning. The Fort Worth Court of Appeals held eight-liners unconstitutional lotteries in 2022, according to the Texas Civil Justice League. The San Antonio Report says the Texas Supreme Court declined review and denied a final rehearing request in 2024, and that Councilwoman Teri Castillo filed a request for a San Antonio ban, as reported Sept. 9, 2026. KWTX reported in October 2025 that Waco was considering a ban that would take effect Jan. 1, 2026, if approved.
4. Test the revenue split
This is a hard rule. Under Sec. 2153.205, the owner is first reimbursed for the next year's Sec. 2153.401 tax and any other tax or fee on the machine's exhibition. The owner may then agree to pay a bailee or lessee no more than 50 percent of gross receipts. Subsection (c)(1) bars agreeing to waive the reimbursement, so ask counsel about any clause having the owner absorb the tax. Subsection (d) says the Comptroller must revoke the license of a holder who violates the section. Rule 3.601(c)(1) allows refunds of money a malfunctioning machine accepted, after the licensee gets the depositor's details.
Hypothetical arithmetic only: on $10,000 gross with a $60 reimbursement and no other taxes or fees, the most the owner could agree to pay the location is 50 percent of $9,940, or $4,970.
Recommendation: define gross receipts and write out the deduction order. Editorial risk flag: Penal Code Sec. 47.03(a)(1) makes it a Class A misdemeanor to intentionally or knowingly operate or participate in the earnings of a gambling place. If a machine is a gambling device, a percentage split sits close to that language.
5. Control collections and audit rights
Rule 3.601(c)(3) bars a licensee from letting the bailee or lessee open the cash box, except on a machine with an income meter totaling deposits in dollars and cents. Keys to the cash box of a machine not expressly exempt stay with the licensee or its employees. Rule 3.601(c)(2) requires complete, separate records of gross-receipts distribution for each location at each collection.
Rule 3.601(d) lists location-owner contracts among machine records and states a two-year period after ownership ends. Sec. 2153.201(c) requires owner records for at least four years, or longer if Tax Code Sec. 111.0041 requires. Recommendation: contract to the longer period and add audit rights and a process for disputed counts.
6. Paper any credit
Sec. 2153.252 allows credit to a lessee or bailee only for a business or commercial purpose. Sec. 2153.254 requires a signed written agreement stating the amount, consideration and repayment terms. Sec. 2153.255 sets consideration at not less than one-half percent and not more than interest at 1.5 percent per month. Excess charges trigger a refund and void the unpaid consideration. Violating the subchapter is a Class C misdemeanor. Recommendation: have counsel review any up-front money before signing.
7. Read exclusivity narrowly
Under Sec. 2153.305(a)(5), the Comptroller may refuse, suspend or revoke where a contract restricts a location owner's right to buy or use a product, commodity or service not regulated under the chapter. Sec. 2153.359 makes it a third-degree felony for a person with a financial interest in a licensed business to make a real-property lease agreement limiting the other party's right to obtain a machine from any source, or to obtain a machine lease or bailment through coercion, threats or intimidation. Recommendation: flag rights of first refusal, non-competes, ties to ATMs or vending, and any landlord with a machine-business interest.
8. Protect title and access
Recommendation: state that title stays with the named owner, tie it to the serial schedule, and address lender liens, damage, theft, insurance and removal access. Property Code Sec. 54.021 gives a nonresidential building landlord a preference lien on property "of the tenant or subtenant" in the building for rent due, which is why ownership should be documented. Title also has a cost: Penal Code Sec. 47.06(a) reaches knowingly owning, transferring or possessing a device known to be designed for gambling, with intent to further gambling.
9. Build a compliance matrix
Recommendation: assign who holds the license, pays state and local tax, keeps permits attached, reports location changes, handles inspections, supplies game-version documentation and tracks local rules. The state tax is $60 per machine per year, and counties and cities may add up to one-fourth of that rate (Sec. 2153.451). Sec. 2153.406(c) requires the permit to be securely attached. Sec. 2153.352 lets the Comptroller seal a machine for a suspended or revoked credential, unpaid tax or non-registration, with a $50 release fee. Sec. 2153.351 makes accepting a license or certificate consent to entry by the Comptroller or a peace officer during normal business hours.
Count machines. Local Government Code Sec. 234.131 defines a game room as a for-profit business with six or more amusement redemption machines or chance-based contrivances, and "game room owner" includes a person who signs a lease for one. Civil penalties run up to $10,000 per violation, with each day separate. The Harris County Sheriff administers permits for unincorporated Harris County.
A compliance covenant allocates tasks and does not establish lawfulness. Vendor statements are claims, not rulings. Pace-O-Matic's spokeswoman told the Dallas Morning News its devices are ruled legal in Texas, while its June 11, 2026 release quotes spokesperson Mike Barley saying "not every machine labeled a 'skill game' actually is a game of skill."
10. Stress-test indemnity and enforcement events
Dresser Industries v. Page Petroleum (Tex. 1993) applied conspicuousness and the express negligence doctrine to indemnities and releases. A party seeking indemnity for its own negligence "must express that intent in specific terms within the four corners of the contract." Plumlee v. Paddock (Tex. App. 1992), a lawyer referral-fee case that supports only the general principle, says "courts generally will not enforce illegal contracts." Do not assume a contract shifts criminal exposure.
Seizure timing matters. Under Code of Criminal Procedure Art. 18.18, absent conviction or prosecution, show-cause notice goes to the person found in possession, or is posted on the courthouse door if no one was found or the address is unknown. An interested person must appear on the 20th day after mailing or posting, and failure to appear timely forfeits any interest. Recommendation: require the venue to tell the owner immediately, and name who appears, controls defense and pays counsel.
Address landlords too. Penal Code Sec. 47.04(a) covers renting or letting property "with a view or expectation" of use as a gambling place. Civil Practice and Remedies Code Chapter 125 lists gambling prohibited by the Penal Code as nuisance activity. Judgment must order the place closed for one year (Sec. 125.002), and after an injunction violation a court may order a landlord to terminate a lease (Sec. 125.045).
Red flags before signing
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No Comptroller contact statement.
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A location share above 50 percent, or a tax reimbursement waiver.
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A venue-held key on a non-metered machine.
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An undocumented advance.
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Exclusivity tied to a lease or to unregulated goods.
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"Guaranteed legal" language.
Next, use the vendor comparison checklist to compare suppliers and contracts. It records questions and evidence, not legal approval, vendor verification or machine profitability.
Related reading
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Texas 2027 Legislative Session: A Calendar for Skill Machine Operators
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Texas Coin-Op License Types, Explained: Credentials, Fees and the Limits of a License
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Amusement and Music Operators of Texas: AMOT's Record at the Capitol and in Court
Sources
Reporting is for information, not legal advice. A vendor listing or the term skill game does not establish a machine's legality in any jurisdiction.
AI assistance is disclosed where used. Consult primary sources and qualified counsel for legal decisions.