>>You might liken an underground ICO to a bug chaser party where some participant doesn't even know what that is.
The vast majority of people applauding restrictions on securities offerings would vote against any party that advocated similar restrictions on high-risk sexual activity. That shows that most people are just conforming to the popular viewpoint, and not independently and critically thinking about the issue.
That is dangerous, because these issues are too complex, and too important, to decide on nothing more than what position is the popular fad. They have very significant consequences for huge numbers of people. We as a society need every single voter to fully understand the principle behind every law, and be able to justify it, because the consequence for violating the laws is that a person has their property seized, or their freedom taken away.
Also, I think your analogy is inappropriate. People investing in crypto tokens is not going to do damage anywhere close to that done by "bug chaser parties". It's just money, if that (much of it is in the form of other crypto-tokens, so we're not even talking about fiat currency being risked).
Even if you accept that people bankrupting themselves is a terrible outcome for society, the fact remains that people have plenty of other ways to blow their money. I can't see how these investments not being prohibited would make the problem any worse.
But what a lack of prohibitions and a free market in soliciting and making investments would do is provide people with valuable exposure to the real investment world, and allow them to get a better understanding of how marketing hype, and speculative bubbles work, and how to identify real value. It would also allow people in much lower socio-economic groups to raise capital.
Finally, no one is saying that victimizing behaviour, like fraud, should be legal. The question is, how do you address predatory behaviour. The answer in the West has traditionally been to punish those convicted of committing it. Cookie-cutter rules that subordinate every participant in an industry to a centralized gatekeeper, are disproportionate to the threat of fraud and inconsistent with the principles of a free society, like the presumption of innocence and the freedom of association and contract.
They overly regiment the market, which inhibits innovation, and create barriers to entry to various sectors of the economy that exacerbate income inequality.