Are Multi-Tiered Affiliate Programs Legal in the U.S?
This Question From Affiliate Networks | 2 Answers
QUESTION:
What is the point where its considered MLM? I know that network marketing requires registrations in several U.S. states. I want to create a multi-tiered affiliate program that’s at least 2 tiers, and maybe up to 10. I’ve heard that 2 tier affiliate programs are legal in all 50 states but I wasn’t sure about 5 or 10 tiered affiliate programs.
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Multi-tier affiliate programs ARE MLM! If you go to 5 or 10 tiers, you are quite likely to be investigated (or charged) for Ponzi-Scheme type of fraud. You absolutely must hire a good attorney on this one, someone with experience in setting up MLM and multi-tier affiliate marketing. Failure to get a good attorney to advise you on this and draft proper legal agreements for affiliates will definitely cost you a bundle, and could quite likely land you in jail.
Get a lawyer!
OK here is the truth. Pyramid schemes are illegal, usually only involve recruiting others in to the business, and do not sell any type of consumer products. MLM, is legal, and it can be a way to make money. Again MLM, involves recruiting other and getting money not only from that but also from product sales. For instance, Beachbody uses multi-level marketing, and there are many, many tiers in their company.
Just do some research on the internet. You may find what you need.