Do you sell digital goods to consumers? You may want to stop using the words “buy” and “sell.”

Starting January 1, 2025, California’s AB 2426 prohibits providers of revocable digital goods from using the terms “buy,” “purchase,” and similar terms in ads and offers without providing a clear and conspicuous notice that the consumer is getting a “license” subject to easily accessible terms and conditions (or getting the consumer’s affirmative acknowledgment that they’re receiving a revocable license). In practice, most providers of digital goods want some rights to revoke a consumer’s access, such as if the provider stops supporting the goods or if the consumer violates the provider’s terms and conditions.

The law applies to “sellers of digital goods” and is particularly relevant to providers of online movies, music, recordings, books, games and virtual items, as well as sellers of physical goods accompanied by access codes to digital goods. Subscription-based services and free products are excluded from the law’s scope.

How to comply if you offer revocable digital goods?

Consider the following:

1. Replace words such as “buy,” “purchase,” and “sell” in your ads, offers, user experience flows, and contractual terms with words that don’t trigger the law.
2. Consider whether you really wish to “license” your digital goods to consumers. Licensing digital goods may trigger unanticipated tax consequences.
3. If you do offer consumers the ability to “buy” or “purchase” revocable digital goods, state clearly and conspicuously in plain language that consumers are actually getting a license subject to your terms and conditions, which must be available through a hyperlink, QR code or similar method. The law defines “clear and conspicuous” in a manner not entirely consistent with the FTC’s definition of “clear and conspicuous”.

AB 2426 forms part of California’s False Advertising Law, violations of which may result in criminal fines of up to $2,500 per violation and/or up to six months imprisonment. It is also very common for plaintiffs to assert that a violation of California’s False Advertising Law constitutes a violation of California’s Unfair Competition Law, which establishes a private right of action.