Consider the case of someone who wants to launch a small business to do something that can't be doled out in small chunks to backers. Let's say I want to build a better wheelchair, for example. Well, even if people can tell from my descriptions and existing work that I really know what I'm doing and have a fantastic idea, few people actually need a wheelchair. So with the kickstarter model this could be a tough project to get going, but if equity could change hands it could be a lot easier.
Yes, there's going to be fraud with this, lots and lots of fraud. But there's already a lot of fraud in the market. It's not important to attempt to eliminate fraud, it's more important to make sure people have enough information to know when they're doing something risky. On the whole I think it's vastly better for everyone if we enabled startups at the low end at the risk of widespread small scale fraud than if we keep everyone's investments locked away with the "too big to fail" companies where large scale fraud and malfeasance has the potential to topple governments and destabilize the world economy.
I suspect it's at least as hard to do the latter as it is to do the former, and almost certainly harder. At least with the regulatory framework in place, the person you have to con is a professional auditor. Without that regulation, it's going to be trivially easy to con the average investor.