Ruling in Apple antitrust case frees NFTs from ‘Apple Tax’

A U.S. appeals court has upheld a lower court’s decision in Epic Games’ long-running battle against Apple (NASDAQ: AAPL), which found in favor of Apple on nine of the 10 counts alleged by Epic Games over the tech giant’s stringent control over the App Store and the requirements developers must adhere to in order to have their app listed.

However, the court did affirm that Apple’s anti-steering rules, prohibiting app developers from guiding users off-app for payments, are unlawful. The rules prohibited developers from directing users off-app to complete purchases. As Apple takes a 30% fee on in-app purchases, they had the practical effect of precluding non-fungible token (NFT) apps from being listed on the App Store.

Epic Games had originally sued Apple under the Sherman Act (the U.S.’s general anti-competition code) and under California’s Unfair Competition Law over the onerous requirements Apple places on developers before they can have their app listed on the App Store. Developers must pay a flat fee for the listing and agree to a sweeping licensing agreement. The three clauses Epic Games took issue with are: the requirement that iOS apps only be listed on the App Store, the requirement to use Apple’s in-app payment system to process payments, and the prohibition against communicating out-of-app payment methods to users.

In a 2-1 decision, the court of appeal upheld the lower court’s judgment which found for Apple on all but one count:

“There is a lively and important debate about the role played in our economy and democracy by online transaction platforms with market power,” said the Judges in a written decision.

“Our job as a federal Court of Appeals, however, is not to resolve that debate — nor could we even attempt to do so. Instead, in this decision, we faithfully applied existing precedent to the facts as the parties developed them below.”

Though Apple hailed the decision as a victory, the lone count that went against Apple is likely to have significant consequences for app developers using the App Store—and beyond. The appeal judges affirmed the lower court’s decision in favor of Epic Games regarding its claim under California’s Unfair Competition Law, finding that Epic Games had successfully argued that Apple’s ‘anti-steering’ provisions prohibited developers from steering app users to non-App Store payment channels, are unlawful.

This ruling will be of particular interest to digital asset developers and collectors. By forcing all app purchases to run through the App Store, all purchases made via the app would be subject to Apple’s 30% fee, significantly reducing the viability of digital asset apps on the App Store and, in particular, the purchase and sale of NFTs. Apple’s 30% cut is vastly more expensive than the commission typically taken by exchanges, which hovers around a couple of percent.

Coinbase (NASDAQ: COIN) is just one entity that has had trouble getting its app cleared by the App Store as a result of the rules. Apple blocked a release of Coinbase’s mobile wallet in 2022, demanding that the exchange pay Apple a percentage of the gas fees from NFT transfers. On Twitter, Coinbase said that “this is akin to Apple trying to take a cut of fees for every email that gets sent over open Internet protocols.”

Uniswap is another. Uniswap’s mobile wallet was rejected by Apple just days before its planned launch date of December 2022 despite previously being cleared for listing. The app wouldn’t be listed on the App Store until April of this year.

Other than the anti-steering ruling, the decision affirms that Apple’s rules do not restrain trade and create a monopoly over the distribution of apps on Apple devices under the Sherman Act. Still, a ruling that Apple’s anti-steering prohibitions violate California’s anti-competition law is a big win for NFT developers looking to list their products on the App Store.

Watch: Asset Layer CEO Jack Laskey on NFTs & micropayments will transform gaming