Hello and welcome to the forum! Well I live in California and I just gotta know under what law did you find that? I strongly think that is not the case but you may well know something I don't!
I think what you are refering to are the recent suits against Sprint, AT&T and Verizon about the "structure" of the ETF's. The courts ruled that "as structured" they were illegal. Verizon's policy now has a pro-rated declining ETF structure where each month reduces the ETF naturally by $5 each month.
Also, the settlement agreement changed the structure of the ETF's so that you could pay full retail price for the phone and simply be on a regular month-to-month plan - or - you could use your own fully owned phone and be on a month-to-month plan with no ETF.
However, those ETF's are still fully legal if you buy the phone at the deep discounts (like New Every Two) providing Verizon offers the declining pro-rated feature . . . which they are doing in compliance with the law.