High Court rules in ASIC’s favour in appeal against Full Court decision in Block Earner case

• a facility through which a consumer could make a financial investment under s 763B of the Corporations Act 
• a derivative under s 761D of the Corporations Act, as the amount of consideration in Australian dollars varied by reference to the cryptocurrency asset value 

ASIC also asserted that the Earner product was a financial product because it was a managed investment scheme under s 9 of the Corporations Act. 

ASIC explained that a consumer would contribute Australian dollars or crypto-assets to Block Earner, which would then use or intend to use the contribution to generate a financial return for the consumer. 

The primary judge of the Federal Court declared that Block Earner: 

• breached ss 911A(1) and (5B) of the Corporations Act by carrying on a financial services business without an AFSL over the provision of financial services in connection with the Earner product 
• contravened ss 601ED(5) and (8) of the Corporations Act by operating an unregistered managed investment scheme relating to the Earner product 

The primary judge found that the Earner product was: 

• a financial product under s 763A(1)(a) of the Corporations Act because it was a facility through which Earner product users financially invested under ss 763B(a)(i) and (iii) of the Corporations Act 
• not a derivative under s 761D of the Corporations Act because the definition of derivative excluded a managed investment scheme under s 9 of the Corporations Act 

Block Earner appealed. On 22 April 2025, the Full Court of the Federal Court granted Block Earner’s appeal on liability and set aside the primary judge’s declarations of contravention. 

The Full Court determined that the Earner product was not a financial product within division 3 of part 7.1 of the Corporations Act because it was not: 

• a facility through which a person could financially invest under s 763B 
• a managed investment scheme under s 9 of the Corporations Act 
• a derivative under s 761D of the Corporations Act 

ASIC appealed before the High Court. Again, ASIC argued that the Earner product was a financial product within division 3 of part 7.1 of the Corporations Act, as it was: 

• a facility for financially investing under s 763B of the Corporations Act 
• a derivative under s 761D of the Corporations Act 

ASIC’s appeal allowed

The High Court of Australia allowed ASIC’s appeal in relation to ss 763B and 761D of the Corporations Act. The High Court ruled that the Earner product: 

• was a financial product as defined in s 763A(1)(a) of the Corporations Act because it was a facility through which a person could make a financial investment within the meaning of s 763B of the Corporations Act 
• was also a derivative under s 761D of the Corporations Act 

Regarding its first conclusion, the High Court said, “Block Earner used (and intended to use) the user's contribution of AUD to generate a financial return for the investor (the [annualised percentage yield (APY)]) and to generate a profit for itself (the margin or differential between interest rates).” 

In connection with its second conclusion, the High Court held that: 

• Given the finding that the Earner product was a financial product under 763A(1)(a), it could not have been a credit facility 
• For the purposes of s 761D(1)(c), the amount of Australian dollars a user could receive would depend on the eligible cryptocurrency’s market value in US dollars and the exchange rate of USD for AUD at the end of the Earner product’s term 
• The substance of the arrangement was for Block Earner to provide a return in AUD of which the exchange service formed part, not for the future provision of an exchange service 

“This reinforces ASIC’s long-standing position that the definition of financial product is broad and technology neutral and so captures new and emerging products without the need to amend the legislation,” Sarah Court said in ASIC’s media release. 

ASIC noted that the case would proceed to its appeal from the penalty judgment before the Full Court of the Federal Court of Australia. 

“Firms offering products that provide a return to consumers or involve the conversion of assets must carefully consider whether their offerings are financial products, and if so, ensure they are appropriately licensed or authorised before distributing them,” Sarah Court said.