Legal Definitions - multilevel-distribution program

A multilevel-distribution program, also known as a pyramid scheme, is a type of property-distribution scheme where participants pay for the chance to receive compensation for introducing new people to the scheme. They also receive compensation when those new people introduce more participants.

Pyramid schemes are illegal in most states because they rely on constantly recruiting new members to pay off earlier members, rather than selling a legitimate product or service.

For example, a company may promise participants that they can earn money by recruiting others to sell a product. The new recruits are then encouraged to recruit even more people, and so on. However, the only way for participants to make money is by constantly recruiting new members, rather than selling the product itself.

This type of scheme is illegal because it is unsustainable and relies on an endless chain of recruitment to keep going. It is important to be cautious of any program that promises easy money through recruitment rather than legitimate sales or services.