Jito Claims JitoSOL is Not a Security

On Tuesday, Solana infrastructure project Jito asserted that its flagship token, JitoSOL, is not classified as a security. This announcement regarding a $2.4 billion asset was not unexpected, but the public nature of their declaration was notable.

The Jito Foundation released a comprehensive “Securities Classification Report” detailing in 24 footnoted pages why JitoSOL cannot and will not fall under SEC oversight. This level of transparency is rare, as such reports are typically prepared for private clients rather than for public consumption.

According to sources at Jito Labs, Trump’s support for crypto has emboldened them to publicly state what they had previously discussed privately. The foundation aims to inspire other industry players to follow suit in similar public declarations.

Lucas Bruder, CEO of Jito Labs, mentioned, “There’s a lot of optimism right now from builders, and more willingness to try to work with regulators to create better rules for builders.”

Historically, under former President Biden and SEC Chairs, the agency pursued many leading crypto companies over compliance issues. Current regulatory shifts, however, have led to the dropping of significant lawsuits questioning the securities status of crypto assets, including liquid staking tokens (LSTs).

LSTs are essentially depository receipts allowing access to the value of locked assets (typically ETH or SOL) while contributing to blockchain security and earning staking rewards. The popularity of this sub-industry has surged, with Ethereum hosting $26 billion in LSTs and Solana housing $6 billion. Jito holds the position of the largest Solana LST, more than twice the value of its closest competitor.

Despite previous engagements, the SEC has never accused Jito of legal violations, and interactions with the project’s backers have been nonexistent for some time. However, the new regulatory stance opened opportunities for dialogue, leading Jito’s founder to meet with the crypto task force earlier this year to discuss staking.

The classification report draws comparisons between JitoSOL and the established Howey Test, which determines whether an asset qualifies as an investment contract. Key points include that the JitoSOL issuance operates independently on a blockchain.

Rebecca Rettig, Jito Labs’ legal counsel, emphasized, “The most important takeaway is this is pure technology.”

Furthermore, the report reflects on the positive crypto sentiment from the White House. It mentions an executive order aimed at establishing the U.S. as the global crypto capital.

The report warns that applying federal securities law to liquid-staking solutions could render them obsolete and counteract the Executive Order’s goals.