#94 | US Court Rules Apple's 30% NFT Tax as Illegal

Estimated Read Time: 7 minutes

Hey friends,

Wonderful to have you with us today! In this edition, we have some huge industry news from Mastercard and Apple that could change up Web3 forever. Let’s just jump into it!

Bitcoin and Ethereum have failed to regain their $30k and $1.9k macro highs as they currently sit at $29k and $1.8k respectively after a week of red. The entire crypto industry continues to face selling at higher levels showing signs that the bears have probably not given up yet.

The market’s lack of confidence may be attributed to the very soon Federal Reserve meeting on May 2 and 3 which has FedWatch projecting a 90% probability for a 25-point rate hike. These rate hikes have been no good which sees businesses and consumers cutting back in their spending which has historically contributed to falling market values. Although the short term seems bleak, it's important to consider the start of the year when Bitcoin and Ethereum sat at $16k and $1.1k respectively, so when zooming out to this scale it's hard to argue it hasn't been a great year for the blockchain.

The second-largest payment-processing company in the world Mastercard should be no stranger to readers of Morning NFTea, with their continued commitment to the crypto world. That has led to stories like our coverage of the Mastercard Web3 Music Accelerator Program, piloting Central Bank Digital Currencies, NFT customizable cards, and their Web3 payment infrastructure, but their latest initiative could have one of the biggest impacts on the entire industry, the Mastercard Crypto Credential.

Announced this weekend, Mastercard states the Crypto Credential will be a set of common standards and infrastructure that will help verify interactions among consumers and businesses using public blockchain networks. Mastercard’s Raj Dhamodharan discussed the potential for regulated institutions and governments to start using public blockchains, saying “All of them are looking for an identity approach to which wallets they can interact with, and what kind of activities they can do in a compliant manner”.

When considering a future of blockchain-powered payments, it's hard to imagine a better player to create the necessary infrastructure and relationships required for the Web3 revolution than an industry giant that already has a lock on the world with its 1.544 billion circulating Mastercard cards. On the announcement, Mastercard shared a similar sentiment, saying “We’ve done this for years in payments – pioneering innovation in identity verification and global standards. We look forward to bringing decades of experience to this space to enhance trust and work with the broader industry and governments to enable further innovation.”

Trusted consumer verification is a huge and promising move for the blockchain world as we inch ever closer to mainstream adoption. Initially, Mastercard wants to use the technology for straightforward consumer aliases attached to wallets, richer information for blockchain transactions, and supplying services to support Travel Rule compliance for cross-border transactions.

You could argue that Mastercard is just trying to get an early jump on dominating the next generation of financial transactions, but despite what their true intentions may be, we cant argue that customer-verified access to public blockchains is another great tool in the toolbox to help governments and countries get behind this emerging technology.

Apple needs no introduction as the world’s most valuable company, but last September this goliath was met with a ton of backlash from Web3 after its new policy subjected NFTs to the same fees as regular in-app purchases, a whopping 30% commission.

Although Apple officially enabling NFTs on their App Store saw the potential for so much growth in the ecosystem, its 30% App Store tax on all NFT sales was a huge kick in the guts for the community which somehow needed to stay competitive amongst the single-digit fees of online counterparts. CEO of Epic Games Tim Sweeny was very vocal about Apple's greedy tactics, saying “Now Apple is killing all NFT app businesses it can’t tax, crushing another nascent technology that could rival its grotesquely overpriced in-app payment service. Apple must be stopped”.

Fortunately for Web3 though, Tim and Epic Games took the matter to the U.S. Court of Appeals who this week ruled Apple's App Store NFT policies “were anti-competitive and in violation of California’s Unfair Competition Law”.

Specifically, the decision declared that Apple’s mandate for developers to use their in-app payment system for NFT transactions stifled innovation and hindered competition within the market. The ruling came as part of a re-evaluation of the Epic Games lawsuit against Apple in 2020. The judges concluded that Apple impeded competition, creating significant implications for how Apple must now go about Web3 and NFTs. What this actually means is the court’s decision frees iOS developers to send consumers to the web inside of the app to do direct business, which was previously prohibited in Apple's policy. Apple told Bloomberg that it is “considering further review” of the decision, but it's hard to imagine the leg they have to stand on with its previous ridiculous 30% tax on everyday NFT transactions.

With all the stars aligning, if the court ruling remains then developers will have a much easier time creating and selling NFTs on iOS devices, opening up a new level of accessibility for Web3 onboarding for the 1 billion active iPhones in the world. On the successful ruling, Tim said “This is a big win for consumers and developers alike, Apple’s anti-competitive practices have stifled innovation and competition in the NFT market for too long. This ruling is a step in the right direction”. And it most definitely is a step in the right direction, who knows the potentially industry-changing amounts of people who could be onboarded to NFTs through a thriving iOS Web3 eco-system, I guess we will just have to wait around to see what happens next.

It’s $PEPE season.

One whale took opportunity of the huge green candle and sold $2M worth of $PEPE… taking a 40% slippage hit in the process while using Metamask’s in-wallet swap.

Experienced coin holders did not approve of the move, citing that it should have been dumped on CEXes instead.

Speaking of dumping…

I couldn’t imagine waking up with $1.3M worth of Doodles in my wallet. At least he now has a good shot at getting 1 of 300 Pharrell packs… right?

In other NFT project personnel news, it seems like in the process of scaling, founders are stepping down to allow either more experienced hires to take charge, or to cut costs (removed from day-to-day operations).

While this may have shocked some holders, those involved with the startup world will know that this is commonplace practice and if anything, represents that the project/company is gearing up and getting its books together.

Have a great couple of days and we will see you back for the next edition, take care!

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DISCLAIMER:

None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.