I wonder if this will end with people going to prison for securities fraud?
Right now a lot of people are making the mistake of investing in an ICO that they don't understand. Like with any kind of investing; it's their responsibility to do their research. What will happen at the end of this is what happens normally in the financial world; smart people who understand each currency are going to make money at the expense of wealthy but poorly informed people who are randomly pouring their money all over the place trying to make a quick buck.
Moreover, a lot of the money that goes into these ICOs ends up funding open source projects that are either directly or indirectly related to the cryptocurrency itself (and this helps the entire industry as a side-effect).
Sure, there might be some black market money involved but I think that at least much of that money will be put to good use. It's the government's job to track people who are using the platform for illegal means.
If somebody buys chemicals to make illegal drugs, it doesn't make sense to arrest the chemists for manufacturing the chemicals. The chemicals can be used for good and bad; if you sum everything up and the net result is a positive change for society, then overall it is a good thing.
That's not how it works. Many kinds of securities can only be sold to accredited investors for just this reason; you may not like that law, but it is the law.
I think ICOs are more fair because unlike in mainstream finance, there is much less information asymmetry because the code is all there for anyone to see. Anyone can access all the information they need.
Well... I'm not against ICO's, but as bad as traditional finance world is, there are a lot more controls than in ICO's.
For example it is quite easy for ICO organizers to buy their own tokens using their own money, without anyone knowing about that. So they can actually pump their own funding round up without that costing a dime - they just get the money themselves, and additionally they can also sell the tokens on aftermarket.
With traditional markets that kind of tricks are much harder to pull off.
When the bubble will burst, angry mob will look for someone to blame and politicians will look for initiatives to protect them. Decisions will be made, and laws enacted. This thing will be emotional, not logical.