What is the legal distinction between pyramid schemes and multi-level marketing?

Question

What distinguishes bona fide multi-level marketing operations from pyramid scams?

Answer 1

The most conspicuous difference between pyramid schemes and legally accepted multi-level marketing (MLM) companies is that the MLM members earn’ the bulk of their rewards by selling a product or a service to end users or retail customers, whereas in pyramid schemes, new sellers are obtained through the compensation of already registered members to sign up new recruits’. This however is not always the case since in practice this distinction can be blurred as a few of the MLM companies do allow their members to earn profits from the sale of the goods only.

Comments

the difference between an honest MLM and a pyramid scheme is easy: in an honest MLM you never have to purchase anything to enter, you just need to sell products (without having to buy them first), and what you earn from your referral is coming from their own products sells VS in a pyramid scheme you have to purchase products or pay a monthly fee just to stay in the business. Basically: honest MLM = focused on selling products VS pyramid scheme = focused on recruiting sellers.

---

I went to one of those once. They told me “This isn’t a pyramid scheme. Your job is a pyramid scheme. You’re working to make someone else rich. Here you make yourself rich”

---

Hi. Im 14 years old. How do i explain to my parents that what they're being sold is a mlm and a scam?? Bc they believe everything i learn from the internet is wrong

---

This just reminded me of a "friend" trying to sign me up for Herbalife. When I told him that was a pyramid scheme he got upset and started with his programed script on how this was not a pyramid scheme

---

The product should sell itself. Basically, you shouldn't have to hire more people just to get money. The thing you're selling should be able to generate a revenue