High Court rules 7-0 that Block Earner's fixed-yield crypto product required an AFSL, overturning a 2025 Federal Court decision. Penalty question remains open.
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Australia's High Court handed the corporate regulator a clean win today, ruling 7-0 that Block Earner's now-defunct fixed-yield product required a financial services license. The June 17 decision overturns an April 2025 Federal Court ruling that had exonerated the company, capping a four-year legal fight that lawyers say will shape how digital asset products are regulated in the country.
The case turned on the Earner product, which Block Earner offered between March and November 2022. Customers deposited Australian dollars or crypto and received fixed returns. The company lent the deposited crypto to third parties to generate income, according to court documents and ASIC's media release. By the time the Australian Securities and Investments Commission filed civil penalty proceedings in November 2022, Block Earner had already stopped offering the product. The regulator argued customers were exposed because the firm never held an Australian Financial Services License to offer that product.
The case took a winding path through the courts. A Federal Court judge agreed with ASIC in February 2024, finding Block Earner breached licensing requirements. Four months later, the same court relieved the company of any penalty. Block Earner cross-appealed the licensing finding itself. In April 2025, the Full Federal Court sided with the company, holding that Earner was not a financial product. That court leaned heavily on the literal wording of Block Earner's terms of service, which stated that loaned crypto would not be used to generate a benefit for users, according to an analysis by law firm K&L Gates.
ASIC sought special leave to appeal to the High Court, which granted the request in September 2025. After hearings in Canberra on March 12, 2026, all seven justices found that Earner qualified as a facility through which investors made a financial investment. The court said it was enough that customer funds were used, or intended to be used, to produce returns for both the customer and the issuer. Arguing otherwise "would ignore the commercial reality of any such financial investment," the judgment said.
The justices also accepted ASIC's argument that Earner functioned as a derivative. Customer payouts shifted based on crypto asset values and exchange rate movements, the regulator said.
ASIC Chair Sarah Court said the ruling "clarifies when products that provide a return fall within the existing financial services regulatory regime." She added that firms offering products involving returns or asset conversion "must carefully consider whether their offerings are financial products" and obtain proper licensing before distributing them. The High Court stressed the Corporations Act's definition of a financial product was written to be broad and technology-neutral, which means it can capture novel product types without legislative amendments, according to the ASIC statement.
Block Earner CEO and co-founder Charlie Karaboga acknowledged the ruling. He pushed back on the regulatory approach. He said legal clarity for digital assets "should come through proper legislative reform, not retrospective litigation." Karaboga noted the case involved a product the company voluntarily shut down in 2022 and that no finding of customer loss, dishonesty, or misconduct was made. He called it "unfortunate that such significant questions about the application of financial services law to digital assets have had to be tested through enforcement against a small, innovative Australian startup."
The penalty question remains unresolved. A June 2024 Federal Court decision that relieved Block Earner of penalty liability is still under appeal by ASIC. That matter now returns to the Full Federal Court for determination.
Separately, Australia's Parliament passed the Corporations Amendment (Digital Assets Framework) Act in April 2026, establishing new rules for asset platforms and tokenized custody platforms.
For firms offering crypto yield products, the practical implication is straightforward. The High Court confirmed that the existing financial product definition under the Corporations Act is broad enough to capture products that generate returns from customer deposits, regardless of the technology used. Any firm offering a product where customer funds are deployed to generate income for both the customer and the issuer likely needs an AFSL. The court rejected the argument that the literal wording of a terms-of-service document could override the commercial substance of the arrangement.
The decision also carries implications for the derivative classification. The justices accepted that Earner was a derivative because payouts depended on crypto asset values and exchange rates. That means any product with variable returns tied to an underlying asset price could face the same classification, even if the product is marketed as a fixed-yield or lending product.
Block Earner's own regulatory trajectory shows the complexity. The company received an Australian Credit Licence from ASIC in May 2026, weeks before the High Court decision, making it the first crypto platform in Australia authorized to offer regulated lending products under its own credit license. That license covers a different product set than the Earner product at issue in the case.
The Full Federal Court must now decide whether Block Earner faces a penalty and, if so, how much. The 2024 decision that relieved the company of penalty liability is under appeal. No date has been set for that hearing.
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