ASIC seeks High Court appeal of Block Earner in landmark application

In a significant development just announced, ASIC has applied for special leave to appeal the Block Earner decision to the High Court of Australia, signaling its intent to challenge the Full Federal Court’s ruling that Block Earner’s fixed-yield crypto product was not a financial product under the Corporations Act 2001 (Cth).

A quick recap

In April this year, the Full Federal Court found that Block Earner’s “Earner” product, which allowed customers to earn a fixed return by lending crypto-assets to Block Earner, did not amount to a financial product in the form of either a managed investment scheme, a financial investment, or a derivative.

The Court’s reasoning turned on two central findings:

1. Users did not gain rights to benefits produced by a “scheme”; and
   

2. The fixed yield paid by Block Earner was not dependent on its use of the crypto-assets, but rather a contractual repayment obligation.

   
   

The Court also pointed to clear and deliberate disclosures in Block Earner’s user terms that clarified these arrangements. On that basis, the Court overturned the earlier finding that an Australian Financial Services Licence (AFSL) was required and dismissed ASIC’s appeal regarding a waiver of penalty which the Federal Court had granted Block Earner in the lower decision. ASIC had appealed the grant of that waiver of penalty in a highly unusual move and in response Block Earner had filed a cross appeal against the original finding.

ASIC wants the final word

ASIC's latest move, being an application for special leave to apply to the High Court of Australia, underscores the ostensible concern of the regulator regarding the consequences of the Full Federal Court's reasoning. In its brief media release, ASIC stated it is seeking clarification on what constitutes a "financial product", especially in contexts involving:

1. fixed-interest returns; and
   

2. asset conversion from one form to another (e.g., crypto-to-fiat or tokenised forms).

The regulator stresses that the statutory definition of a financial product is meant to be broad and technology-neutral, and that the clarification by the High Court is "in the public interest" extending beyond the crypto-asset sector to all financial services:

The definition of financial product was drafted in a broad and technology-neutral way, and ASIC believes it is in the public interest to clarify this. This clarification is important as it applies to all financial products and services whether they involve crypto-assets or not.

Special leave and why it matters

The High Court of Australia does not hear every appeal. A party must first apply for what is known as "special leave", which is only granted in limited circumstances, such as where:

1. there is a question of legal principle of national significance;

   
   

2. there is inconsistency in the law that requires resolution; or

   
   

3. the matter involves significant public interest.

In simple terms, special leave is the gateway to the High Court. ASIC must be able to convince the High Court that this case is bigger than just Block Earner. If leave is granted, the High Court will deliver the final word on how far Australia's financial services laws extend. It will also be the first ever crypto-related case in Australia to reach the High Court.

High Court special leave applications are not straightforward, and it may be challenging for ASIC to show how the analysis of whether a single product, which is no longer being offered, and was removed from the market when ASIC first raised concerns, is a matter of 'significant public interest'.

What comes next

This latest move raises renewed uncertainty for crypto and fintech businesses. The Full Court's decision was widely welcomed for drawing a clear line around what is - and what isn't - a regulated financial product (at least in certain crypto-contexts). If the High Court decides to weigh in, that line could once again shift.

Regardless of the outcome, the Block Earner case continues to highlight a deeper issue: Australia's regulatory framework is still not supporting innovation. Until meaningful reform is introduced, key questions will be left to be answered in the courtroom, rather than through the far more efficient pathways of clear guidance and collaborative engagement.

Written by Steven Pettigrove and Luke Higgins with Michael Bacina