So, somewhat smart kids from Iowa will ask themselves: Why bother? I can't compete to get in, I can't compete when I am actually in there, and I can't compete when I get out. Forget this game, I'm taking my tiddly-winks and going home.
And that is where the tier-2 schools really shine. Vassar, Colorado School of Mines, the Claremonts, etc really can take those kids that aren't literally-cookie-cutter-perfect-snoflakes-drill-and-kill and make them really shine. Yeah, they won't be the CEO of Hundai or GE, but they will make a damn good Lt. Major, or a VP at 7-11, or a hell of a McDonald's franchise owner, or the best darn member of a school board that is always re-elected, or a real good child abuse prosecutor. You won't make billions, but you will make 3-4 million.
There really is a need here for B- students that deserve a good living. Getting rid of the darn SAT is a great way to attract them.
Tier-2 private colleges are having a tough-ish time right now, it could be a way to differentiate and attract ambitious students- "after you've thrown your application into the goofy lottery system, why not apply here, where we take you seriously? As you can tell with this significantly less goofy admissions process!"