ASIC, Australia’s corporate regulator, on May 21, applied for special leave from the High Court to appeal a Full Federal Court ruling in favor of crypto exchange Block Earner. The appeal intensified the legal dispute over the status of digital asset yield products.
The Australian Securities and Investments Commission (ASIC) asked the High Court to clarify what falls within the definition of financial product, signaling its intent to challenge the Full Federal Court’s ruling that Block Earner’s fixed-yield crypto product is not a financial product under the Corporations Act 2001.
Particularly, it wants the High Court to explain how interest-earning products and products involving the conversion of assets from one form into another are regulated and treated under the Act.
ASIC believes the definition of financial product was drafted in a broad and technology-neutral way, and it is in the public interest to clarify this. According to the Australian regulator, the clarification is important as it applies to all financial products and services, whether they involve crypto assets or not.
The High Court will consider ASIC’s application on a date to be determined.
Karaboga agrees the matter relates to the definition of a financial product
The CEO and co-founder of Block Earner, Charlie Karaboga, acknowledged ASIC’s application to the High Court and noted that the matter is now related to a broader legal question around the definition of a financial product. He added that the definition extends well beyond Block Earner and the crypto sector.
The Full Federal Court of Australia ruled in favor of crypto lender Block Earner on April 22, overturning previous findings that its discontinued “Earner” product constituted a regulated financial product requiring licensing.
With the ruling, an appeal from ASIC to impose penalties on Block Earner was dismissed, and the regulator was ordered to pay full legal costs, including those incurred from the original trial.
The court also completely overturned all previous findings that the company violated financial laws. Critical to the court’s decision was the finding that customers had no exposure to Block Earner’s business performance outside of the agreed interest rate and that contractual terms framed the product as a loan, not an investment.
“Block Earner continues to operate business-as-usual and remains fully committed to compliance, innovation, and building products that benefit Australian consumers.”
–Charlie Karaboga, CEO and co-founder of Block Earner
Karaboga also believes the Full Federal Court’s April ruling was a strong and well-reasoned decision that upheld the integrity of Block Earner’s operations. He added that the exchange remained confident in the soundness of that judgment and would respond to ASIC’s application through the appropriate legal channels.
Full Federal Court says ‘Earner’ is not a financial product
In April, a decision by the Full Federal Court overturned earlier findings against Block Earner, which ASIC argued had offered a fixed-yield crypto product called “Earner” without a financial services license. The court heard ASIC’s appeal and Block Earner’s cross-appeal on March 6 this year, and it later allowed Block Earner’s cross-appeal and dismissed ASIC’s appeal on April 22.
The Full Court notably found that the offering did not constitute a financial product under existing law, which dealt a blow to ASIC’s efforts to bring crypto services under the same framework as traditional finance. It also dismissed ASIC’s allegations that Block Earner’s variable-yield digital asset-related offering “Access” was a financial product and that Block Earner engaged in unlicensed financial services conduct by offering Access.
The Block Earner team also argued that its offering simply allowed customers to loan crypto under fixed terms and receive interest without pooling funds or exposing users to business risk.
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