Because IPO's raise 10x or 100x more money? And IPOs are for shares which give you equity - ownership - in business? Unless the structure of ICO changes pretty fundamentally they are not going to be of serious interest to Wall Street.
What is the main function of investment banks? Its putting the deal together, securing the funding from other banks and investors to pool together the bulk of the issue, along with underwriting. This would still be needed in a system that run on Ethereum or other smart contract. Smart contracts can automate issuance and increase access to funds for low capitalisation projects, but they wont replace those old networks of investors and lawyers.
And to the OP point, the regulations already exist! That's why US (and some other) citizens are excluded from just about every ICO, as they are from many IPOs. People have tried and succeeded to launch their dodgy fund raising before, some have failed, some have scammed, and rules and regulations exist. Cryptocurrency isn't doing anything new, only changes how some things are done.
The reason IPO's raise more money, is because it's the only thing, which is allowed.
And US citizen being excluded is because SEC wants to get every penny they can out of their citizen. So they go after anyone, who receives funding from US citizen without being registered with SEC. Which is mindblowing in my opinion, but it just shows how much importance US as government has in the rest of the world.