A skill machine distributor agreement is a contract covering who supplies, places, services and shares revenue from cash-prize skill machines. In practice it means one of two contracts: the one that appoints a distributor for a manufacturer's games, or the one between a machine owner and the business that hosts the machines. State law, not the contract, determines legality.
Which contract are we talking about?
The typical chain runs from manufacturer to distributor or route owner to host location. This guide covers both links in that chain, but focuses on the owner and location contract, because that is where state statutes most often set terms. Before comparing clauses, operators should confirm what their own state calls each party, since the labels do not carry over from one state to another.
The word "distributor" changes by state
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Texas. Occupations Code Chapter 2153 does not define "distributor" or "manufacturer." Section 2153.002 defines an "owner" as "a person who owns a coin-operated machine in this state" and an "operator" as a person who exhibits or displays a machine "in a place of business that is not owned by the person." Section 2153.152 sets up three license types: general business, import and repair. The Texas Comptroller says import license holders also need a general business license to offer machines for customer use, that a $60 annual occupation tax permit must be attached to every machine available to customers, and that renewals are due Nov. 30.
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Georgia. Under O.C.G.A. §50-27-87, the contracting party is a "master licensee," which signs written agreements with location owners or location operators.
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Nebraska. Neb. Rev. Stat. §77-3001 defines a distributor as the person who places and controls or manages a device inside a retail establishment. The "operator" is the business where the device sits, which is roughly the reverse of the Texas meaning. Under §77-3003, distributors need a biennial license that includes a background check. Beginning Jan. 1, 2025, the fee is "two hundred dollars per cash device up to a maximum of ten thousand dollars." Section 77-3008(2)(b) recognizes revenue-sharing agreements in which the distributor pays the taxes.
Core commercial terms
Attorney Steven R. Roeser of Stimmel, Stimmel & Roeser, writing from the distributor's side, lists these core terms of a distribution agreement: territory and exclusivity, term and renewal, ownership and payment, termination and severance, customer service, limits on non-competes, and sales materials and support. On exclusivity he writes that a distributor should seek a territory "exclusive to the point in which even the manufacturer or owner of the product is not allowed to sell into the territory." That is general commercial advice. As the Texas section below shows, some exclusivity arrangements run into state statutes.
Service obligations
The contract should say who maintains the machines, who handles cash fills and troubleshooting, and who supplies software updates. As one example, Pace-O-Matic described its convenience-store model in a September 2023 NACS Magazine Q&A, which the magazine labels as sponsored content. In that piece, the company says its games and redemption terminals are owned and maintained by POM and its local partners, while the location provides "a small area of floor space." These are the company's own claims and have not been independently verified. Operators should get any similar promise written into their own contract.
Where Texas law overrides the boilerplate
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Required disclosure. Under §2153.204, a written contract between a licensed owner and an operator "must state the name, mailing address, and telephone number of the comptroller."
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Revenue split cap. Under §2153.205(c), an owner may not agree to waive the tax reimbursement provided in Subsection (b). An owner also may not pay a bailee or lessee more than 50 percent of gross receipts remaining after that reimbursement. Section 2153.205(d) says the comptroller "shall revoke the license" of a violator.
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Source restrictions. Under §2153.359, it is a third-degree felony for a person with a financial interest in a business that must be licensed under the chapter to sign a real-property lease that limits the other party's right to obtain machines "from any source." Obtaining a machine lease or bailment "by coercion, threats, or intimidation" is also a felony under that section.
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Location purchasing. Under §2153.305(a)(5), the comptroller may refuse, suspend or revoke a license if an agreement restricts a location owner's right to buy or use products or services that the chapter does not regulate.
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Credit. Under Subchapter F (§§2153.252 through 2153.258), a license holder may extend credit to a lessee or bailee only for a business or commercial purpose. The credit must be documented in a signed written agreement that states the amount, the consideration and the repayment terms. Consideration must fall between one-half percent and 1.5 percent per month. A violation is a Class C misdemeanor.
Georgia's placement rules
Under §50-27-87, a placement agreement must be in writing, and a copy must be kept on file at both businesses. Agreements entered after April 10, 2013 must be exclusive between one master licensee and one location. Agreements entered or renewed after May 3, 2016 must run for at least one year. A nine-month rule applies when a location changes hands. Subsection (c) prohibits commissions or fees for arranging these contracts, except for payments to the master licensee's own employees.
Legality comes before the contract
Section 2153.003 of the Texas Occupations Code says the chapter does not authorize any machine "prohibited by the constitution of this state or the Penal Code." Under Penal Code §47.01(4), the amusement exclusion covers only devices that reward players "exclusively with noncash merchandise prizes, toys, or novelties" worth no more than 10 times the play price or $5, whichever is less. Section 47.06 makes it an offense to knowingly own, transfer or possess a gambling device with intent to further gambling. No exclusivity, warranty or indemnity clause can make a device lawful.
Questions to ask before signing
These are editorial suggestions, not legal requirements:
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Is the territory defined, and may the supplier sell into it?
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What conditions apply to exclusivity, and does any of it restrict machine sources or location purchases in ways state law prohibits?
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How long is the term, and how does renewal work?
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What notice and cure period apply before termination, and which obligations survive it?
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Which party holds each state license and tax permit, and is that allocation in writing?
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What service response times are promised for maintenance, cash fills and software updates?
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Does the revenue split comply with any statutory cap?
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Are credit or financing terms documented in a signed written agreement?
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Who carries the risk if machines are seized, and where are disputes resolved?
To compare suppliers side by side, use the vendor comparison checklist. The worksheet records questions and evidence. It is not legal approval, vendor verification or a measure of machine profitability. Before signing, have the agreement reviewed by a licensed attorney in your state.
Related reading
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Skill Machine Certification Requirements: How They Have Changed Since 2015
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Skill Game Trade Shows 2026: What Happened Beyond IAAPA, What's Left and the 2027 Dates
Sources
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Stimmel, Stimmel & Roeser, Distribution Agreements in the United States
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NACS Magazine, Game On With Pace-O-Matic Games of Skill (Sept. 2023, sponsored)
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 was used in preparing this article. Consult primary sources and qualified counsel for legal decisions.