Are Pyramid Schemes Illegal?
I’m fed up. Everywhere I turn—social media feeds, email inboxes, even casual conversations—there’s another 'done-for-you' program or pyramid scheme dangling the carrot of easy money.
These slick pitches promise financial freedom with zero effort, but they all seem to follow the same tired script: overhyped claims, vague details, and a trail of disappointed suckers left in their wake.
It’s exhausting to sift through the noise, knowing most of these are either outright scams or flimsy setups dressed up as legitimate opportunities. I’ve had enough—and I bet you have too.
Done For You Schemes
Are Pyramid Schemes Illegal?
Yep, pyramid schemes are illegal in many places, including the U.S. They’re seen as a type of financial scam because they make money mainly by bringing in new people, not selling real products or services.
In the U.S., these schemes break federal and state laws, and the Federal Trade Commission (FTC) calls them deceptive business practices. Basically, they promise big returns from recruiting, but everything falls apart once the recruiting slows down, leaving most folks out of pocket.
However, some multi-level marketing (MLM) companies operate in a gray zone. MLMs are legal as long as they're selling actual products or services rather than just focusing on getting new members.
The line between a legit MLM and a pyramid scheme can get fuzzy. Courts often check where the bulk of the revenue comes from—are they making money from product sales or new member fees?
A case like FTC vs. Amway in 1979 set an example that MLMs can be okay if they emphasize selling products rather than just recruiting.
So, flat-out pyramid schemes? Totally illegal. MLMs that start looking too much like pyramid schemes? They might be on shaky ground. It all depends on where you are since laws vary by country or state.
Why Am I Sharing This?
I'm jumping into the messy world of pyramid schemes and their legality for a straightforward reason: knowing more can save you a lot of trouble. These schemes have fooled many people with the lure of easy money, only to leave them with nothing when they inevitably crash. You'll be better at spotting the warning signs by learning how these schemes operate, where they become illegal, and how they differ from those almost-legit MLMs.
Whether you're trying to protect your savings or just curious about the dodgier side of making money, this stuff is important—because the next time you're pitched a "great opportunity," understanding it could keep you from falling for it.
Want To Learn The Right Way To Make Money Online? HINT-If you are reading this, you are in the right place.
Recent Comments
14
The lines are blurred with pyramids, Ponzi, networks, affiliates, MLMs, brokers, agents etc.
PONZI - Outright fraud
PYRAMIDS - A structure
MLMs - Multiple Levels (more than two)
BROKERS/AGENTS - Common in Real Estate, Insurance and Finance.
AFFILIATE - Usually 1 level, sometimes 2 levels (Affiliates and Affiliate Manager)
The MLMs and “Network Marketing” models are on the edge of the law constantly. Their model is based on recruiting and retention and is usually a balancing act with the FTC as to what percentage is recruiting and legitimate products sales.
Their model reasons there are so many is because it is so easy to use courses, training and education as the “product/service”.
This is WHY I think WA should put more emphasis on the “WA Community” using Online Video Groups and “in person” MeetUps to show our authentic selves.
😈 Scammers are cautious and Hide Their Identity
💕 Authentic Marketers are Open, Authentic and Confident.
There is a huge difference between recruiting people for memberships and recruiting people to provide them with value, which WA does. Here, you are free to choose your own path, be it promoting the platform or doing your own thing with an outside program.
Michael
If the pitch is about the money you will make instead of the quality and value of the products you should look elsewhere.
I was part of a pyramid scheme once. It sucked a lot of money and, worse, time from me. It was frustrating spending hours driving to a prospect to visit and then talking for hours only to have them tell me no. I hated it. It was so much work with no return and when there was a return, I didn't see it, those above me did.
Now I am working with a legit MLM and love it. We have amazing products and amazing people who truly appear to want to help others—at least I know I do—and having these like-minded and like-hearted people has produced a nice little side income!
I love that Wealthy Affiliate has made it possible for me to share my passions, and I hope that I will one day be making enough from both to truly live the "nomad" lifestyle!
Best wishes,
Karin
Thanks for sharing your story. I am glad you found one that is trustworthy, as many are not. I wish you luck moving forward.
Michael
MLMs are not very trustworthy either, and Wealthy Affiliate discourages them. One time, an MLM actually sued Wealthy Affiliate for speaking out against them, but Thankfully, Wealthy Affiliate won in court. Here's the evidence: We Were Sued. We Stood Up. We Prevailed.
Yes, I had read that one.
Our company is about the product which is of the highest quality otherwise I would not be a part of it. I researched it before I joined. It didn't even cost me anything and I could still make money today if I never purchased a thing.... Maybe it is not your "traditional" MLM... We different!
Have a great day!
Karin
Thanks amazingMG, I have been there and bought the T, 'done-for-you' program or pyramid scheme dangling the carrot of easy money. I have fell for the online Carrots of easy money and LOST, Thanks again
MrWillan
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Great post! I really appreciate the way you broke down the legal aspects of pyramid schemes—it’s such a confusing topic for a lot of people. I was a Herbalife Millionaire Team member for several years, and from my experience, it was a well-run, multi-billion-dollar company. That said, it was often sued over whether it was a pyramid scheme, and even when you’re doing well financially and helping others transform their lives, that kind of scrutiny can leave a sour taste. It’s a tricky balance, and I think discussions like yours are important for shedding light on the differences between legitimate MLMs and illegal schemes. Thanks for sharing your insights!
You are welcome.
I get so upset when I see people fall for these. It motivates me to write about them.
Michael