In June 2026, the High Court of Australia (HCA) handed down its unanimous judgment in the case of Australian Securities and Investments Commission v Web3 Ventures Pty Ltd [2026] HCA 21, bringing the years-long saga between the financial services regulator and the crypto-based fintech platform (almost) to an end.
The decision marks the HCA’s first major foray into the characterisation of crypto-yield products under Australia’s financial services (AFS) regime and reaffirms ASIC’s longstanding ‘substance over form’ approach in answering the age-old question of what is a financial product.
Read more about the HCA’s decision below.
Background
In 2022, Web3 Ventures Pty Ltd trading as Block Earner (Block Earner) operated an online crypto-based platform offering various services to its users, including an ‘Exchange’ service under which users could exchange AUD to cryptocurrency and buy and sell cryptocurrency.
The saga between Block Earner and ASIC principally revolved around the ‘Earner’ product offered by Block Earner which, in broad terms, allowed users to ‘convert’ AUD into a nominated cryptocurrency and then ‘lend’ that converted cryptocurrency to Block Earner. During the term of the ‘loan’, users earned a fixed return on, and paid in, the relevant cryptocurrency, while Block Earner on-lent the relevant cryptocurrency to third parties at higher interest rates than the rate it was obliged to pay to users. At the end of a ‘loan’, Block Earner ‘converted’ the user’s relevant cryptocurrency (including the interest earned) back into AUD and transferred such amount to the user.
ASIC first commenced proceedings against Block Earner in the Federal Court of Australia in November 2022, alleging that it had operated an unlicensed financial services business and an unregistered managed investment scheme (MIS). Since then, ASIC and Block Earner have litigated, and different Courts have ruled on, the correct characterisation of the Earner product, as summarised below:
| ASIC's views | Block Earner's views | The Court's decision | |
|---|---|---|---|
| Federal Court (first instance) |
The Earner product was a financial product, being one or more of the following: (a) an MIS; (b) a facility through which a person makes a financial investment (Investment Facility); and/or (c) a derivative. |
The Earner product was not an MIS, an Investment Facility or a derivative. |
The Earner product was a financial product, because it was:
(a) an MIS; and (b) an Investment Facility. However, it was not a derivative. |
| Full Federal Court (appeal) |
The Earner product was a financial product, being one or more of the following:
(a) an MIS; (b) an Investment Facility; and/or (c) a derivative. |
The Earner product was not an MIS, an Investment Facility or a derivative. | The Earner product was not an MIS, an Investment Facility or a derivative, and consequently was not a financial product. |
| High Court |
The Earner product was a financial product, being one or more of the following: (a) an Investment Facility; and/or (b) a derivative. Interestingly, before the HCA ASIC did not pursue its original claim that the Earner product was an MIS. |
The Earner product was not an Investment Facility or a derivative. |
The Earner product was a financial product, because it was: (a) an Investment Facility; and (b) a derivative. |
The Earner product was a financial product
In June 2026, the HCA unanimously held that the Earner product was both an Investment Facility and a derivative.
Investment Facility
One of the key features of an Investment Facility is that:
(a) a person (the ‘investor’) gives money or money’s worth (the ‘contribution’) to another person; and
(b) the other person uses the contribution to generate a financial return or other benefit for the investor, or either the investor or the other party intends for the contribution to generate a financial return or other benefit for the investor (even if no return or benefit is in fact generated).
Block Earner’s case was that the contribution of users was the converted cryptocurrency, and that such cryptocurrency was used, and intended to be used, to generate a financial return or other benefit, not for the users, but for Block Earner (and this was stated in the terms and conditions of the Earner product). It contended that the users did not have any interest in or connection to Block Earner’s on-lending activities, and that their entitlement to receive interest on the cryptocurrency was not dependent on how Block Earner used the cryptocurrency.
The HCA did not accept this, finding as follows:
- the contribution from users was the amount of AUD they nominated to convert to cryptocurrency (not the converted cryptocurrency), and the contribution of that AUD generated the return of the fixed interest for users;
- the contribution from an investor may be used to generate a return for both the investor as well as the business; in any profit-making investment business, the business uses the funds invested to generate a return for both itself and its investors;
- for an arrangement to be an Investment Facility, there is no need for investors to have a right or interest in a business’ downstream activities or for there to be direct connection between the return of the investor and the particular endeavour in which the contribution is used by the business. The parties do not need to mutually intend for the contribution to be used in any particular way;
- the Earner product shared some characteristics with an interest-bearing deposit, relevantly including that a bank will often pool its customers’ deposited funds and on-lend those funds so as to derive a return from which it can pay a return to customers; and
- consequently, the Earner product was an Investment Facility.
The HCA also found that, since the Earner product was an Investment Facility, it was excluded from being a ‘credit facility’ (and accordingly Block Earner could not rely on the financial product exemption for credit facilities). Labels that Block Earner had used to describe the product such as ‘loan’ and ‘lend’ were irrelevant to this analysis.
Derivative
In broad terms, a derivative is an arrangement under which a party is required to pay consideration to another party at a future point in time, where the amount of the consideration or value of the arrangement is determined by reference to the value or amount of something else.
Before the HCA, Block Earner contended that the ‘arrangement’ between it and users was the loan of the converted cryptocurrency and that the cryptocurrency was returned to the user at the end of the loan. In particular, Block Earner contended that the conversion of AUD into cryptocurrency (and vice versa) occurred via the Exchange service offered by Block Earner and therefore did not form part of the Earner product. As a separate line of argument, Block Earner also contended that the Earner product fell within the derivative exemption as a contract for the provision of future services.
The HCA rejected these claims, finding that the entry point of the arrangement between Block Earner and users was the contribution of the AUD by users, and that the end point was the return of AUD to the users. In particular:
- To access the Earner product, in practice, users were required to select ‘Lend’ from the list of available services from Block Earner, nominate the relevant cryptocurrency and the amount of AUD to be invested and re-confirm their acceptance of Block Earner’s terms of use. By completing these steps, the users acquired the Earner product.
- The Exchange service was not a distinct arrangement from the Earner product. First, the contribution of the users was the AUD (not the cryptocurrency). Furthermore, Block Earner’s terms of use indicated that (among other things) the conversion of AUD into cryptocurrency formed part of the Earner product. The fact that the Exchange service could be accessed by users independently and outside of the Earner product did not change the terms of use of the Earner product, which included specific ‘exchanges’ mandated by those terms of use.
- Even if the Exchange service was a distinct arrangement from the Earner product, it was reasonable to assume that the users would regard them as constituting a single arrangement.
- In relation to whether or not Block Earner could rely on the exemption for contracts for the future provision of services, the HCA held that such exemption requires consideration of the purpose or object of the contract, rather than any services which are incidental to that purpose or object. In the present case, the HCA considered that the substance of the Earner product was not to provide an exchange service in the future, but for the provision of a return in AUD.
- As such, the HCA found that the Earner product was a derivative.
The end in sight…?
Although the chapter on whether or not the Earner product was a financial product has come to a close, the HCA has remitted the proceedings to the Full Federal Court to determine the liability of Block Earner to pay pecuniary penalties for its contraventions of the AFS regime by carrying on a financial services business without an appropriate AFS licence. Previously at first instance, the Court had decided to relieve Block Earner from liability to pay pecuniary penalties on the basis that it had acted honestly when offering the Earner product to users and, having regard to all the circumstances, it ought fairly be excused for the breaches. As this decision had been contested by ASIC, time will tell how this question will proceed through the Courts.
Key takeaways
Here are some key takeaways from the HCA’s decision:
- Crypto products within scope of AFS regime: Consistent with ASIC’s messaging, the concept of a financial product is technologically neutral. When considering if any AFS licensing implications arise, businesses will need to consider the substance over the form of their proposed offering.
- Fixed yield products may still be financial products: Fixed yield offerings may still be financial products as they generate a return for the investor. A customer may still be considered to be making a financial investment even if their contractual return is fixed and not tied to the business’ downstream activities – this has the potential to significantly blur the line between traditional loans vs financial products. While ‘vanilla’ loan/deposit arrangements would still fall within relevant exemptions relating to credit facilities, the broad interpretation adopted by the HCA creates scope for many more edge cases.
- Consider broader commercial arrangement: Businesses should consider the broader implications of their product offerings. Compartmentalising each component of the offering in the terms and conditions is unlikely to prevent the offering from being a financial product if, in substance, the components of that offering in combination are a single arrangement.
- Enforcement risk is always live: Although the Earner product was offered for only approximately 8 months, and no loss or damage was suffered by investors as a result of Block Earner doing so without an AFS licence (a proposition which had been accepted by ASIC), it still resulted in various court proceedings spanning four years, and the saga is ongoing. Businesses should always consider the potential enforcement risk by ASIC before releasing their offerings.
In light of this decision, fintechs and crypto-service providers should carefully assess their products and consider whether or not they could be financial products. If your business requires any assistance, please contact the Addisons Funds and Financial services team.