If It Was Neither Debentures Nor MIS, Then What?
ASIC has lost landmark lawsuits—against Finder and Block Earner—trapping itself in a regulatory vacuum of its own inaction.
Key Takeaways:
In March 2024, the Federal Court ruled that Finder Earn did not constitute a debenture under the Corporations Act.
In April 2025, the Full Federal Court ruled that Block Earner's product did not constitute a managed investment scheme, a financial investment facility, or a derivative.
Both rulings suggest that current legislation does not adequately encompass innovative financial products like crypto-yield offerings.
ASIC lost landmark lawsuits, leading to a regulatory vacuum that the regulator was meant to address in the first place.
ASIC's losses in these landmark lawsuits have led to a regulatory vacuum that the body itself needs to address.
ASIC faced defeats in both landmark lawsuits against Finder (in March 2024) and Block Earner (in April 2025), highlighting a regulatory vacuum that the existing framework failed to address.
In two landmark decisions, Australian courts have highlighted significant regulatory gaps in the country's approach to fintech and crypto assets.
Finder Wallet Case
On 14 March 2024, the Federal Court delivered its judgment in ASIC v Finder Wallet Pty Ltd [2024] FCA 228. The case centred on Finder Wallet's product, "Finder Earn," offered between February and November 2022. This product allowed customers to convert Australian dollars into the stablecoin TrueAUD (TAUD) and allocate these digital assets to Finder Wallet in exchange for a fixed annual return of 4.01% or, in some cases, 6.01%.
ASIC contended that Finder Earn constituted a debenture under the Corporations Act 2001 (Cth), arguing that customers deposited money with Finder Wallet with the understanding it would be repaid with interest. However, Justice Markovic found that the product did not meet the legal definition of a debenture, as there was no undertaking by Finder Wallet to repay money as a debt. Instead, the arrangement was deemed a contractual promise to repay in cryptocurrency, not money.
Block Earner Case
In a similar vein, on 22 April 2025, the Full Federal Court ruled in ASIC v Web3 Ventures Pty Ltd [2025] FCAFC 58. Web3 Ventures, trading as Block Earner, offered a product called "Earner" from March to November 2022. This product enabled customers to lend cryptocurrency to Block Earner in return for a fixed yield. ASIC alleged that Earner was a managed investment scheme, a financial investment facility, or a derivative, and that Block Earner operated without the necessary Australian Financial Services Licence (AFSL).
Initially, the Federal Court found in favor of ASIC, declaring that Block Earner had contravened financial services laws. However, upon appeal, the Full Federal Court dismissed ASIC's claims, ruling that the Earner product did not constitute a managed investment scheme, a financial investment facility, or a derivative under the Corporations Act.
A Regulatory Vacuum?
These decisions underscore a troubling regulatory gap. While these crypto-yield products function similarly to traditional financial investments—where consumers entrust assets to a company with the expectation of returns—they fall outside existing legal definitions. The courts' rulings suggest that current legislation does not adequately encompass such innovative financial products.
The Australian government's lag in updating financial regulations to address fintech innovations has left regulators like ASIC and the judiciary grappling with outdated frameworks. The courts, adhering to the adversarial legal system, are constrained to the arguments presented and cannot unilaterally reclassify products beyond the cases brought before them.
Industry Boom or Consumer Risk?
While these rulings may be seen as victories for the fintech and Web3 industries, promoting innovation and reducing regulatory burdens, they also open avenues for unscrupulous actors to exploit the lack of clear regulations. Consumers are left vulnerable in a market where traditional protections do not apply, raising concerns about potential scams and financial losses.
Who Will Protect Consumers?
With legislative reforms stalled, courts limited by procedural constraints, and ASIC's enforcement efforts hindered by outdated laws, the question arises: who will safeguard consumers in this evolving financial landscape?
There is an urgent need for the Australian government to modernize financial regulations, ensuring they are robust enough to encompass emerging fintech products while providing necessary consumer protections. Without such intervention, the regulatory vacuum will continue to pose risks to both consumers and the integrity of the financial system.