Blockchain technology-based company BTCS Inc. ( NASDAQ: BTCS ) on Tuesday pointed out the differences between its cryptocurrency staking model and Coinbase Global's ( COIN ). Earlier on Tuesday, the U.S. Securities and Exchange Commission sued Coinbase ( COIN ), saying that it's violating securities regulations by offering crypto assets that qualify as securities. A group of 11 states also said COIN's staking rewards program breaks securities law. BTCS ( BTCS ) uses a non-custodial staking model, in contrast with Kraken, Coinbase ( COIN ) and those that use custodial models, i.e., in which they hold investors' private keys to their crypto in the staking process. The difference between the two models is that BTCS's StakeSeeker "operates within the Howey test and does not in our view create securities," the company said. The SEC uses the Howey test to determine if a product is a security. Under that test, an investment contract exists "when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others," the SEC said . BTCS ( BTCS ) said its staking does not keep custody of the crypto assets being staked, does not pool crypto assets with others, and does not have the expectation of generating profits from the efforts of others. "We have proactively analyzed our staking model and drawn conclusions that align with those presented by Coinbase regarding 'Core Staking' and while we believe our non-custodial staking does not create securities, we cannot provide assurances that either the SEC or other regulatory authorities will agree," BTCS CEO Charles Allen said. BTCS stock gained 1.8% in Tuesday afternoon trading. Coinbase (COIN ) slumped 13% . More on Crypto Clampdown: Crypto prices suffer as SEC sues Binance and CEO Changpeng Zhao Binance's Canada exit has been a boon for rival Kraken Canada's OSC probes Binance over whether the crypto exchange tried to skirt rules Coinbase gets SEC warning of potential charges SEC said to be investigating if issuing stablecoins violates investor protection laws
