Apple’s 30% tax mandate on iOS is illegal, judge confirms – and it could be good for crypto, NFTs

In a decision with potentially major implications for NFT and crypto builders, a US federal appeals court has ruled that Apple violated California’s unfair competition law by banning app developers from using payment methods other than the tech giant’s own App Store, which charges a 30% fee on most transactions.

The decision, handed down late Monday by the US Court of Appeals for the Ninth Circuit, came as part of a reevaluation of a 2020 lawsuit filed by Fortnite creator Epic Games against Apple over the tech giant’s alleged monopoly on the mobile gaming market. Apple largely prevailed in the 2021 lawsuit, as well as in Monday’s decision, with judges in both instances finding that Apple does not have a monopoly on gaming apps.

But the victories came with a big caveat. The case’s first judge said in 2021 that by preventing app developers from directing customers to alternative payment methods, Apple stifled fair competition. Monday’s panel confirmed this finding. Epic Games founder and CEO Tim Sweeney tweeted that “Apple won” widely, but championed Epic’s one win on Monday.

“Fortunately, the court’s positive decision rejecting Apple’s antitrust provisions frees up iOS developers to send consumers online to do business with them directly there,” Sweeney tweeted. “We are working on the next step.”

If upheld, the decision could have countless benefits for Web3 app developers. Last September, Apple opened the App Store to NFTs – but only to NFTs sold through its own payment system, which takes a 30% cut of most transactions.

The massive treasure was bitterly received by the Web3 community. Access to the App Store – and the over 1 billion iPhones and iPads it reaches – represents a huge opportunity for Web3 companies looking to break into the mainstream.

But given Apple’s payment policy, this opportunity came at a cost too high for most developers to bear. For context, popular NFT marketplace OpenSea has historically charged a 2.5% commission on NFT sales; the company even recently removed this fee to position themselves better against competitors.

Apple’s stranglehold on NFT-powered apps offered in the store was further cemented in October, when the company updated its guidelines to explicitly state that NFTs can only be used to unlock additional content or features in an App if those NFTs were purchased through Apple’s in-app payment system.

The move put further restrictions on token-gating – the increasingly popular practice of giving NFT holders access to exclusive communication channels, merchandise and other benefits – by only enabling such benefits if developers failed to fight Apple’s 30% cut of sales.

But given Monday’s ruling, the landscape for NFTs may soon look quite different. Apple told Boomberg that it is “considering further assessment” of the decision. However, if Apple does not appeal or if the ruling is upheld again, NFT developers may not only be able to use NFTs purchased over the Internet to unlock features in iOS apps, but also direct users within those apps to purchase NFTs on sites that don’t charge exorbitant fees.

Furthermore, easing such restrictions could allow the use of cryptocurrency in app-related transactions – a development that Apple’s policies currently prohibit.