Block Earner found to have offered an unlicensed financial product

ASIC has successfully appealed a ruling against Block Earner in relation to its fixed-yield digital asset-related product (Earner), which was previously not deemed a financial product.

The High Court of Australia has unanimously found that Earner was, in fact, a financial product, and Block Earner consequently required an Australian financial services licence (AFSL), overturning the Full Federal Court's previous decision in 2025.

The product was available between March and November 2022 with the aim to provide investors with fixed yield returns from digital assets.

The High Court found Earner was a financial product requiring an AFSL, as it was a facility through which an investor made a financial investment and confirmed it was sufficient investors' funds were used or intended to be used to generate a return for both the investor and the issuer, noting "any contention otherwise would ignore the commercial reality of any such financial investment."

The court also accepted ASIC's argument that Earner was a derivative as the amount returned to investors varied by reference to the value of the digital asset and exchange rates, ASIC said.

Block Earner does not have an AFSL but is an AUSTRAC-registered provider and was granted an Australian credit licence by ASIC last month.

Commenting, ASIC chair Sarah Court welcomed the decision to clarify when an offering is deemed as financial product.

"This reinforces ASIC's long-standing position that the definition of financial product is broad and technology neutral and so captures new and emerging products without the need to amend the legislation," Court said.

"Firms offering products that provide a return to consumers or involve the conversion of assets must carefully consider whether their offerings are financial products, and if so, ensure they are appropriately licensed or authorised before distributing them."

ASIC commenced civil penalty proceedings against Block Earner in November 2022 over concerns on investor protection, and although Block Earner was found to have provided unlicensed financial services, the Federal Court decided not to issue any pecuniary penalty.

However, ASIC believed that Block Earner should pay a penalty of as much as $350,000 and escalated the matter to the High Court last May.

In response to the judgement, Block Earner co-founder and chief executive Charlie Karaboga acknowledged the decision and will continue to engage constructively on the regulatory process.

"However, it is important to highlight that this proceeding concerns a product that was voluntarily closed in 2022," he said.

"We continue to believe that legal clarity for Australia's digital asset sector should come through proper legislative reform, not retrospective litigation. It is 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.

"We're excited about the future and remain committed to ongoing regulatory engagement and to contributing to the development of fair, forward-looking financial services laws in Australia."

There has been no finding of customer loss, dishonesty, or misconduct, Block Earner said.

The matter will now be returned to the Full Court of the Federal Court.