Apple’s Unlawful Payments Ban Sparks NFT And Crypto Revolution

Key Points:

• A California court rules Apple’s 30% commission policy violated state competition laws.
• The ruling may allow crypto and NFT projects to add more functionality to their iOS apps.
• The decision could set a legal precedent benefiting creators of crypto and NFT apps.

United States Court of Appeals for the Ninth Circuit decided that Apple had violated state competition laws by preventing app developers from using alternative in-app payment methods other than its own that included a 30% commission.

The court’s decision was in the case of AP vs Epic Games, the creator of the popular video game Fortnite. While the court ruled in favor of Apple on most issues, it upheld a lower court’s decision from 2021 and explained that Apple’s anti-steering provision had harmed Epic Games. The anti-steering condition is an Apple policy that states that developers cannot communicate out-of-app payment methods through certain mechanisms, such as in-app links.

The court explained AP’s anti-steering violation through a second angle, ruling that consumers would have flocked to Epic Games directly had they learned about its much lower commission rate of 12%, compared to Apple’s 30%. The court further explained that if consumers could learn about lower app prices, which are made possible by developers’ lower costs, and can substitute to the platform with those lower prices, they would do so. This would increase the revenue generated by the Epic Games Store.

The ruling frees iOS developers by allowing them to direct consumers to alternative payment solutions. This may clear the path for cryptocurrency and nonfungible token (NFT) projects to add more app functionality. If AP doesn’t appeal the ruling, it could set a case law precedent benefiting creators of crypto and NFT apps because they won’t be subject to Apple’s 30% “tax.”

The court found the anti-steering provision to be “unfair” pursuant to both the competitor-suit “tethering test” and the consumer-suit “balancing test.” The court stated that Epic Games would have earned additional revenue since August 2020 – save for Apple’s policy – by applying these tests. The court ruling may have important implications for developers and consumers alike, as it may encourage the development of alternative payment methods and the creation of competitive platforms.

The decentralized exchange Uniswap is one of the latest crypto projects to make its way into the App Store, despite Apple’s initial withholding of its launch in March. Nearly two months ago, the European Union set new anti-monopolistic rules requiring Apple to permit third-party app stores on its devices, allowing consumers to circumvent Apple’s 30% commissions. However, in December, Apple interfered with NFT transactions sent on Coinbase’s self-custody wallet, claiming that it was entitled to “collect 30% of the gas fee” through in-app purchases.

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