The Full Court of the Federal Court ruled in favor of Web3 Ventures Pty Ltd, which operates under the name Block Earner, a blockchain-powered fintech. The court overturned a previous ruling, allowing Block Earner to continue offering its digital asset services without the need for an Australian Financial Services Licence (AFSL). This decision marks a significant moment in the ongoing legal debate surrounding the regulation of digital assets in Australia.
Background of the Case
Block Earner, a registered digital currency exchange with the Australian Transaction Reports and Analysis Centre (AUSTRAC), faced legal challenges over its product offerings. The Australian Securities and Investments Commission (ASIC) had argued that Block Earner required an AFSL to offer its fixed-yield digital asset product, the Earner product. ASIC’s claim was based on the assertion that the product was a financial product, and thus, Block Earner was operating without the necessary license.
The dispute began in 2024 when Block Earner offered the Earner product from March to November 2022. The Federal Court initially ruled that the Earner product was a financial product, thereby requiring Block Earner to obtain an AFSL. However, ASIC also argued that another of Block Earner’s products, the Access product, should have been classified as a financial product, which would require a managed investment scheme registration. The Federal Court, however, dismissed these allegations.
Federal Court’s Initial Ruling
In February 2024, the Federal Court determined that Block Earner’s Earner product fell under the category of financial products. As a result, it ruled that Block Earner had engaged in unlicensed financial services conduct. This decision was a major blow to the fintech company, as it meant potential penalties and further legal hurdles for offering the product without the proper licensing.
However, the Federal Court also ruled that Block Earner should not face penalties for this contravention, which led to further legal back-and-forth, with ASIC appealing the decision. The agency argued that the company should still be penalized for offering an unlicensed product, but Block Earner maintained that the product did not fall under the financial product definition.
Appeals Process
In June 2024, ASIC appealed the decision to relieve Block Earner from the financial penalty. Following this, Block Earner cross-appealed, arguing that it should not need an AFSL for its Earner product. On 6 March 2025, the Full Court of the Federal Court heard both appeals and decided to reserve judgment. The fintech community and industry stakeholders were closely watching the case, as it could have far-reaching implications for the regulation of crypto offerings in Australia.
The Full Court’s Ruling
In a surprising turn of events, the Full Court of the Federal Court allowed Block Earner’s appeal and dismissed ASIC’s. The court found that Block Earner’s Earner product was not a financial product and therefore did not require an AFSL. This ruling effectively invalidated the previous Federal Court’s decision, providing Block Earner with a major legal victory.
Importantly, the Full Court ruled that it did not need to address the issue of penalties because the initial ruling had already been overturned. The court also ordered ASIC to pay the costs of the proceedings, including the costs related to the appeals.
Industry Reactions
The court’s ruling is seen as a positive development for crypto platforms and decentralized finance (DeFi) projects. It could potentially lead to a more favorable regulatory environment for yield-generating products within the fintech space.
Legal experts have hailed the decision as a significant step forward in clarifying the regulatory landscape for blockchain-based financial products. The ruling focused on the legal structure and obligations of a product, rather than its economic function or operational appearance.
ASIC’s Response
While the Full Court’s decision was a blow to ASIC, the regulatory body has stated that it is considering its next steps in light of the ruling. ASIC’s decision to appeal and pursue regulatory actions against crypto offerings highlights the ongoing tension between innovation and regulation in the digital finance sector.
The Full Court’s decision has raised questions about the future regulatory approach to blockchain-based financial products and whether similar products will be subject to the same scrutiny.
