What happens when (probably not if) the SEC starts regulating the cryptocurrency market in the US?

To date, the U.S. Securities and Exchange Commission has been fairly clear on its view of cryptocurrencies--at least most of them are securities. To the SEC's credit, they have taken the time to learn about and understand the space. It could have been problematic if the SEC had made a rushed decision based on limited information. On the other hand, continued lack of regulatory clarity could hamper innovation in the space, put more investors at risk and create substantial liabilities for companies that have had ICOs and the ecosystem of companies ushering them through the process.

On November 8th, SEC Chairman Jay Clayton stated to the Practicing Law Institute's Institute on Securities Regulation that the ICO market was opaque and open to manipulation and fraud. He followed that on February 6th during a U.S. Senate hearing, "I believe every ICO I've seen is a security." In late February, the SEC subpoenaed 80 cryptocurrency firms. Then, on April 5th during a talk at Princeton University Clayton slightly tempered his previous statement, saying "Just because it's [a cryptocurrency is] a security today doesn't mean it'll be a security tomorrow, and vice-versa." While that may be a half step back in his position, Clayton pretty clearly has concerns about the legality of many issuances in the space under current law.

What do we know about what the SEC is doing at this point?

The SEC is doing its homework
Fraud is a focus--the SEC has killed certain projects that were allegedly fraudulent (Arisebank and Centra (of Floyd Mayweather and DJ Khaled fame)
They have clearly stated that at least some, if not all, cryptocurrencies are securities

What happens if the SEC calls ICOs securities?

Frankly, I don't think anyone really knows what happens, but I would be very interested in the SteemIt community's thoughts. I am also neither a lawyer nor a financial advisor, so this is not advice.

I certainly don't know what happens, but there are a range of outcomes. Here are some of the questions to think about:

Where will the SEC focus?
- The ecosystem is very large at this point. Will the SEC focus on the largest ICOs, the exchanges, third parties providing consulting/banking services? Will the focus be on the most dubious projects (and how do you determine that?)?
- Could the SEC focus on itself and build a regulatory framework that works well for the cryptocurrency ecosystem?
What will the SEC require?
- For ICOs, will the SEC require companies that had ICOs refund investors? Does that mean the amount of funds raised at the ICO? The market value of funds today (that seems like it would be impossible)? Which investors get paid--the ICO investors or the current holders/hodlers? What if a company does not have sufficient funds to meet these requirements?
- For the exchanges, will there be further licensing? Will they be subject to fines for listing securities? Will the SEC try to shut them down?
- For the service providers, will the SEC fine ones providing investment banking services without licenses? Will the SEC require additional licensing? Will there be any criminal proceedings?
What will investors do?
- What does it mean to own a token that was previously a utility token but that becomes a security token? What do holders own?
- If the SEC comes down with a heavy hand, will investors try to sell the "securities" they own? This could cause catastrophic downward pressure on the markets for affected tokens and see some projects crash to zero.
- Would there be a flight to safety? Is that a flight to fiat? To Bitcoin/Bitcoin Cash? Ethereum (which could be a security but has a very robust community of supporters)? If there were a flight to Bitcoin, could the price of Bitcoin skyrocket?
- Will hodlers just hodl?
- Will non-US investors be affected or react?
What direction does the market take?
- It seems like the market is headed towards security token offerings anyway; will investors require full compliance? It seems like that would be the prudent step, at least for US investors.
- Will the SEC allow the market to self-regulate through a centralized industry body?
- Will a more compliant market, which may entail more disclosure, spur larger institutional investors to participate in future offerings?
- If there is a large destruction of value, will the current investors (largely people who have made a lot of money in Bitcoin and Ethereum) be able to invest in new projects?
- Will the decentralized nature of the blockchain space spur a move to geographies where regulators have already proven to be more "friendly" or accommodating to the industry's desires?
- In the intermediate-to-long term, does the structure and scrutiny give the US market an advantage by providing more investor confidence?

What are your thoughts? What other questions should we be asking ourselves?