The problem is that "latigo" means different things to tanners, suppliers and customers. A good rule of thumb is "don't let pets or humans chew on leather that you don't know where it came from and how it was tanned". We consumers haven't got the faintest idea where the hides came from, how they were handled and what chemicals were used to tan them, and unless you know your supplier really well, and he, in turn, knows his stuff, it's always a big question mark.
I had a dog that needed his collars lined because veggie tanned leather irritated his skin. Dogs have choked on leather or needed surgery from swallowing scraps. I know of birds that died because their owners bought them leather to please them. I can break out into a full body rash from handling some leathers, and I've been around the stuff for more than 20 years.
I am not a horse person, so I can't comment on a leather bit, but it seems that if they were a good idea they would have caught on a couple hundred years ago. Slobber is eventually going to make the toughest latigo break down. There are too many variables to calculate the horse's safety chewing on leather, so I'd pass on that one just so I wasn't responsible for a healthy animal getting sick. (What if the bit gets swallowed? I'm not a vet, but I doubt it's going to pass easily through a horse like it might a dog.)
Shep Hermann (Hermann Oak Leather, St. Louis MO) told us at the tannery that if we fell into the vegetable tanning pits and swallowed the solution, we would be fine, but not to do it unless we wanted a much darker skin color for a few months. To make latigo and other waxed and oiled leathers they take the hides and rotate them in driums the size of small apartments. There are precise formulas for the leather the customers request, and only a chemist like Shep could say with any certainty "safe" "poison" or "Who knows?"
I don't advise putting leather in any animal's mouth without a compelling reason and a full evaluation of the leather to be used.
Johanna