Exchange would not allow IEO if they see big risk on it, as they will loss their business if they found violating a serious law. Overall, this is a small move for the exchanges.
Yes I want to agree to this. The exchanges will do themselves more harm to accept an overtly bad project in the exchange because investors would run away from buying or trading with the exchange because of uncertainty. Thus, IEO is a lesser devil. You can now see at least the listing of the coin and decide what you want to do later.
This is a valid point but there are exchangers specially the small ones doesn't care much on what projects would be listed thru IEO. When it comes or trying to compare up the risk we can say that IEO is much better option than ICO when it comes to exchange listing. Business would be mainly affected if they do list out shitty projects but we can't really avoid the fact that even these projects aren't that different on the ones being offered on ICO. Survival on this harsh crypto market is still questionable because it will always matter on its demand and usability.
I know of this because last month I studied some IEO projects especially in exchanges which we can't consider to be at least belonging to the top 20 and many of the projects were questionable at least on my own simple standards. Well, this all boils down to business. Those exchanges, I am sure, are charging good amount of money so a project can have the IEO crowdfunding done in the platform.
This is the reason why we have to be careful if we are still a big fan of new projects either ICO, STO or IEO...many of them are just old dogs wearing new collars. The reputation of the exchange where IEO is done is very critical here...an exchange should have its own strict guidelines and qualifications before allowing a project to come on board.
Right now, in fairness though, I still have to hear a lot of scams and failed projects using the IEO route but let's see next year if this is going to be the same. Maybe a general study or survey of all the projects introduced via the IEO way should be done to see how things are compared to the dreaded ICOs in the past.