- The Federal Court rules that Block Earner’s crypto product is not a financial product under the law.
- ASIC lost its appeal and must pay Block Earner’s legal costs relating to all proceedings.
- Despite winning, Block Earner will not revive the product but will focus on other crypto-backed offerings.
Australia’s Federal Court has ruled in favor of fintech firm Block Earner, dismissing an appeal by the Australian Securities and Investments Commission (ASIC) that sought to classify the company’s crypto-linked yield product as a financial product requiring a license.
Justices Catherine Button together with Wendy Abraham and also David O’Callaghan delivered the judgments. It was concluded that the discontinued Earner product had not met Australian law for the definition of a financial product, a managed investment scheme or a derivative.
Court classifies product as loan, not investment scheme
ASIC began legal action in November 2022, alleging that Block Earner should be licensed for offering it fixed yield crypto earner products. This case concerned the question of whether the case was under managed investment definitions or whether customers’ interactions with the product constituted an investment.
The product operated was found as a straightforward loan agreement. Customers lent digital assets to Block Earner under fixed terms in exchange for interest with no exposure to pooled assets or company performance.
The justices stressed that they did not mix their customers’ assets or invest them on their behalf. Each customer agreement counted as its own and returns were set by contract. Due to the structure of the product and the dependence on legal counsel, Block Earner was cleared of wrongdoing. Financial penalties had already been removed in a June 2024 ruling stating that the company acted honestly.
Block Earner welcomes ruling, confirms product will remain closed
James Coombes, the chief commercial officer of Block Earner said the ruling shows how crypto products should be classified under existing laws. However, he stressed that crypto inclusion does not detract nature of a contractual loan. He also pointed out that the Earner product did not provide pooled upside returns and thus was not a managed investment. According to him, innovation will be enabled by consistent regulatory treatment of crypto assets and traditional assets.
Despite a favourable judgment, Block Earner said it has no intention to bring back the Earner product. The company decided to quit it voluntarily after the proceedings began. The firm will instead concentrate on the development of crypto-backed loan services.
The regulator issued a short statement noting that it is “considering this decision” to pay Block Earner’s legal costs and offered no additional comment.
Ruling sets precedent for crypto regulation in Australia
The Federal Court’s ruling may influence how digital asset products are treated in future legal and regulatory frameworks. Legal experts say the decision shows a willingness by courts to distinguish crypto-specific products from traditional financial instruments.
Charlie Karaboga, Chief Executive of Block Earner, noted from the outset that there was a desire to make sure that the company’s offerings could exist within current legal structures. That effort, he said, is acknowledged by the court and supports a path for compliant innovation.
This case goes wider as more Australians engage with crypto. According to industry data, over four million residents became exposed to the digital asset through their direct purchase of the digital asset or using investment services. In 2023, Block Earner was among several firms targeted by ASIC enhanced enforcement. ASIC’s appeal against the court’s decision may encourage the agency to reexamine how it classifies crypto products in other cases.
