The recent decision in Australian Securities and Investments Commission v Web3 Ventures Pty Ltd [2025] FCAFC 58 marks a significant development in the wave of enforcement-led regulation by the Australian Securities and Investments Commission (ASIC).
This case is part of a broader trend in which ASIC is shaping the regulatory landscape through litigation, particularly in the context of digital assets and financial innovation whilst the industry awaits the Australian government’s draft digital asset legislation.
The decision is highly relevant, not only to the crypto industry, but also to fintechs and traditional financial services providers – prompting ASIC to seek leave from the High Court to appeal the Full Federal Court’s decision. Notably, the first-instance outcome may have influenced ASIC’s draft update to Information Sheet 225 (INFO 225), which was released for consultation between December 2024 and February 2025. The draft guidance proposed an expanded interpretation of how the Corporations Act applies to crypto and digital assets. It remains to be seen whether the Full Court’s decision and ASIC’s appeal to the High Court will impact the final version of INFO 225.
The dispute
ASIC alleged that the “Earner” product offered by Web3 Ventures Pty Ltd (trading as Block Earner) constituted a “financial product” under the Corporations Act. Specifically, ASIC argued that Earner was:
- a managed investment scheme;
- an investment facility; or
- a derivative.
On this basis, ASIC contended that Block Earner was required to hold an Australian financial services licence. At first instance, the Court found that Earner was a financial product in the form of a managed investment scheme and investment facility, making it unnecessary to rule on the derivative argument. However, the Full Federal Court has now overturned that decision, finding that the Earner product was not a financial product. In the absence of legislation from the Government, the Court’s reasoning offers valuable guidance for fintechs, crypto businesses, and traditional financial service providers alike.
The Earner product
The Earner product allowed customers to lend eligible cryptocurrency to Block Earner in exchange for a fixed yield. Typically, customers deposited Australian dollars with Block Earner, which were converted into cryptocurrency via Block Earner’s digital asset exchange. The cryptocurrency was then lent to Block Earner. At the end of the loan term, customers received the original amount plus interest in cryptocurrency, which was then converted back into AUD. However, Block Earner also facilitated direct cryptocurrency loans manually and subsequently added the ability for customers to be repaid in the relevant cryptocurrency.
Was Earner a financial product?
Managed Investment Scheme
The Court held that Earner did not constitute an interest in a managed investment scheme. The key factor was that customers did not acquire rights in a collective scheme. Instead, they were contractually entitled only to a fixed return. They had no right to share in the profits of Block Earner’s lending activities, which were used to fund the yield. The Court emphasized that the statutory concept of a managed investment scheme requires customers to benefit from the scheme’s performance—not merely be repaid from its proceeds.
Investment Facility
Similarly, the Court rejected the argument that Earner was an investment facility. For a service to qualify as such, it must generate, or be intended to generate, financial returns or benefits for the investor. In this case, Block Earner used the funds for its own benefit and bore the investment risk. Customers were entitled only to a fixed return, regardless of Block Earner’s success or failure in deploying the funds.
Derivative
The Court’s analysis of whether Earner was a derivative provides important clarification on the application of the broad and often ambiguous statutory definition.
ASIC argued that the conversion of Australian dollars into cryptocurrency (and back again) and the cryptocurrency loan under the Earn product formed a “single arrangement” under section 761B of the Corporations Act. On this view, the value of the customer’s Australian dollar denominated returns would fluctuate with the price of the cryptocurrency, making the arrangement a derivative.
However, the Court disagreed. It found that the terms of service clearly distinguished between the Earner product and the digital asset exchange service and customers would reasonably view them as separate services. Even if customers were required to use the exchange (which they ultimately were not), that alone did not merge the two into a single arrangement.
Key Takeaways
This decision:
- provides much-needed clarity on how to apply Australia’s financial services laws to innovative digital products;
- delivers valuable guidance on the scope of the Corporations Act definition of a “derivative” which has long been fraught with uncertainty and divergent views; and
- underscores the importance of carefully drafted terms of service and clear product structuring.
If you would like to discuss how Australia’s financial services laws impact your digital products please get in contact with a member of the Funds & Financial Services team.