Jito Labs Sparks Crypto Revolution: Pushes SEC to Greenlight Solana Liquid Staking Tokens for ETFs

Solana's staking ecosystem just got a turbocharge—and Wall Street's gatekeepers are feeling the heat.

Jito Labs leads the charge with a landmark SEC petition to approve liquid staking tokens (LSTs) for exchange-traded products. If successful, this could crack open institutional adoption like a bull market breaking resistance levels.

Why it matters: Solana LSTs would let investors earn yield while maintaining liquidity—a holy grail combo that even TradFi dinosaurs might grudgingly admire (between martini lunches).

The cynical take: Watch legacy finance 'innovate' at blockchain speed—somewhere between glacial drift and a congested Bitcoin mempool.

Jito Labs urges the spread of liquid staking tokens to ETP and possibly ETF

For now, only ETPs allow for staking, but the practice may spread to ETFs with additional requests. The SEC is also still exploring the legal side of staking, for both ethereum and Solana ETFs, while fund issuers are pushing to include various forms of staking and in-kind compensation.

Jito Labs and its associates claimed LSTs are capital-efficient and low-risk, and can benefit ETP investors. So far, the SEC has not explicitly addressed LSTs on Solana or other networks, though there are general guidelines on proof-of-stake networks. LSTs can work as a proxy for direct staking, and the SEC is urged to consider the mechanism for Solana and other chains. 

LSTs are most common on Ethereum and Solana, and are a tool to secure the network, while also putting idle tokens to work.

Requests for staking started in 2024

The initial ETF and ETP filings omitted the issue of staking, as they focused on BTC products. The inclusion of Ethereum and later Solana ETP filings raised the issue of staking. The first filings avoided the topic due to technical uncertainties, taxation issues, and the fear of pushing crypto innovation too quickly to mainstream investors. 

Currently, Solana carries over $7.8B in value through its liquid staking tokens. Most of the tokens are issued by validators or other infrastructure projects on the Solana chain, among which JITOSOL is the leader. 

One of the risks for LSTs is their relative volatility. While SOL traded at $177.75, LSTs ranged between $220 and $200. Jito Staked SOL (JITOSOL) traded at $218.57. Marinade’s token traded as high as $235.06. LSTs are often used in DeFi protocols and have varying price discovery mechanisms.

There is no clear standard for staking service, and each has relatively complex rules. The biggest risk for LSTs is ‘slashing’, where flawed validators can have their tokens confiscated. Therefore, some LST issuers are competing to offer SAFE or vetted services. Recently, Marinade Finance slashed and restaked 340,000 SOL, removing validators from its list. The process is not entirely detailed to mainstream finance regulators, and the SEC will have to research the conditions of staking and slashing.

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