Key Points

  • The First Appellate District, Division Three, affirmed dismissal without leave to amend of a guest's unfair competition law suit alleging that Airbnb and Airbnb Payments operate as unlicensed escrow agents.
  • The court held the complaint alleged no facts showing that any party expected or intended the companies to act as escrow holders, and Airbnb's terms make the payments unit only the host's limited payment-collection agent rather than a fiduciary of all parties.
  • Because guests, hosts and Airbnb itself can cancel reservations unilaterally, the court held the bookings lack the irrevocability that is a hallmark of escrow.
  • The court read the 1999 and 2000 internet-escrow amendments as reaching companies that hold themselves out as escrow agents online, not internet companies in general.
  • The unfair-prong claim also failed, and the court did not reach the trial court's doubts about Edson's standing.

A California appeals court has ruled that Airbnb's payment-processing subsidiary is not an escrow agent under state law, rejecting a guest's bid to force the company to obtain an escrow license and stop keeping the interest it earns on money guests pay before their stays.

A three-justice panel of the First Appellate District, Division Three, affirmed a San Francisco Superior Court judgment that threw out Jamie Edson's suit against Airbnb Inc. and Airbnb Payments Inc. without leave to amend. Justice Petrou wrote the published opinion, filed Oct. 30, and Acting Presiding Justice Fujisaki and Justice Rodríguez joined it.

California's Escrow Law requires escrow agents to keep deposits in separate accounts and bars them from keeping interest earned on those funds. The panel held that those obligations do not attach to Airbnb's payments unit, because escrow status turns on what the parties agreed to rather than on the fact that a business holds money until a service is delivered.

Airbnb runs an online marketplace that connects hosts offering short-term lodging and activities with guests, and it had more than 150 million active monthly users as of 2025, according to the opinion. Airbnb Payments generally collects at least part of a guest's payment at booking and holds it until the stay or activity, releasing lodging payments to hosts 24 hours after check-in.

The platform's payments terms let the subsidiary combine and invest guest funds before paying them out, and they state that it "will retain any interest it earns on those investments." Neither company holds itself out as an escrow agent. The terms disclaim any agency role, except that the payments unit serves as each host's "payment collection agent solely for the limited purpose of accepting and processing funds from Guests purchasing Host Services on the Host's behalf."

Edson, who rented a property through Airbnb for personal use, sued under the unfair competition law, which bars "unlawful, unfair or fraudulent" business practices. She contended that the companies were in reality unlicensed escrow holders, which state regulations prohibit from receiving interest on escrowed funds. Her complaint accused them of a "systematic conversion of . . . consumers' money by way of an unlawful interest-income-siphoning scheme."

The trial court first sent the case to arbitration. After Edson disclaimed any private claim and limited her suit to public injunctive relief, the court lifted the stay. Her operative complaint sought an order requiring the companies to become licensed escrow agents, revise their terms and pay the interest to guests or hosts. In July 2025, the trial court sustained the companies' demurrer without leave to amend.

The panel rejected Edson's argument that Airbnb's terms and listings serve as escrow instructions. "The fatal flaw with her argument, however, is that she failed to allege any facts demonstrating that any of the parties to these transactions have any expectation, belief, or intention that defendants will act as escrow holders," Petrou wrote. The opinion noted that Edson did not even allege she believed she was depositing her money into an escrow or entitling herself to interest.

An escrow holder is an agent and fiduciary of every party to the deal, the opinion explained, while Airbnb's terms make the payments unit an agent of the host alone, for the narrow purpose of processing payments.

In an escrow, a deposit becomes irrevocable once the parties have a binding contract, but Airbnb's terms let guests cancel under a host's policy, let hosts cancel without a guest's consent and let Airbnb cancel and refund the money. "This is fundamentally inconsistent with an escrow transaction," Petrou wrote. "We are aware of no escrow transaction in which the escrow holder may itself cancel the transaction and return the money to the depositor on its own terms."

The court also said the repercussions of accepting Edson's view "could be far-reaching," writing that a travel booking site listing a hotel or rental car could be treated as conducting escrow transactions. "The Escrow Law was not intended to sweep so broadly," the opinion said.

The panel distinguished Pasternak v. Boutris, a 2002 decision in which a licensed escrow company held funds under express escrow agreements for a program that proved fraudulent. In Edson's case, Petrou wrote, there was "no party holding itself out as an escrow company or agent, no escrow agreement, no escrow instructions, and no depositor contemplating the completion of an escrow transaction."

Edson also relied on Assembly Bills 583 and 333, amendments from 1999 and 2000 that brought internet escrow companies under the law. Assembly Bill 583, the court wrote, "was meant to expand the Escrow Law to account for the emergence of companies that were explicitly engaged in the business of escrows offered over the internet, rather than an effort to force internet companies in general to register as escrow agents."

The panel likewise rejected Edson's claim under the law's "unfair" prong. "Whatever guests may understandably feel about defendants' retaining the interest earned by investing their payments, Edson has not alleged facts showing that such a practice offends public policy," Petrou wrote. Because the claims rested on what the court called "a fundamental misapplication of the Escrow Law," it held that no amendment could save them.

The opinion left open whether Edson had standing to sue. The trial court had said it was "not convinced that [Edson] has standing to bring a UCL claim or that the Financial Code contemplates a private right of action," but the panel said the dismissal did not rest on that point.

Lawyers for Edson included Nare Kupelian of Zimmerman Reed; Airbnb and its payments unit were represented by Michael J. Mongan of Wilmer Cutler Pickering Hale and Dorr.

The panel affirmed the judgment in the consolidated appeals, Nos. A174267 and A174839, and awarded Airbnb and its payments unit their costs on appeal.