ASIC High Court request successful against Block Earner decision

The Australian Securities and Investments Commission (ASIC) has been granted special leave by the High Court to appeal an earlier decision by the Full Federal Court that found digital asset trading exchange, Block Earner, did not contravene financial licencing rules with its product.

ASIC first brought civil penalty proceedings in the Federal Court against Block Earner in November 2023, alleging the exchange “provided unlicenced financial services in relation to its crypto-asset based products” and that it “operated an unregistered managed investment scheme (MIS)”, regarding its fixed-yield digital asset-related ‘Earner’ product.

The product allowed investors to “earn fixed yield returns from different digital assets”, according to an investigation conducted by ASIC.

While the Federal Court found in favour of the corporate watchdog in February 2024, three months later the same court absolved Block Earner from having to pay a penalty for offering the ‘Earner product’ – a decision which ASIC then appealed.

Block Earner followed up ASIC’s appeal by cross-appealing the Federal Court’s decision that it needed a financial services licence to offer its Earner product in July 2024. Earlier this year after multiple hearings, the Full Federal Court agreed with Block Earner’s appeal and dismissed that of ASIC, resulting in the regulator seeking the High Court’s “ruling on what falls within the definition of a financial product, as well as clarifying when interest-earning products and products involving the conversion of assets from one form into another are regulated”.

“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,” a statement from ASIC said.

“This clarification is important as it applies to all financial products and services whether they involve digital assets or not.”

ASIC’s appeal to the High Court and the subsequent grant of special leave are conditional on the basis that ASIC pays Block Earner’s costs of its appeal.

The regulator said it has two weeks to file a notice of appeal, to be heard at a later date.