Are Pyramid Schemes Legal in the US?

Question

Accepted Answer

Updated: April 2026 Oleksandr Honcharov, CEO at FlawlessMLM Are pyramid schemes legal in the US? No, pyramid schemes are illegal in the United States at both the federal and state level. The Federal Trade Commission (FTC) prosecutes pyramid schemes under the FTC Act, and most states have additional laws specifically targeting pyramid schemes and fraudulent business opportunities. Federal and State Laws At the federal level, the FTC classifies pyramid schemes as a form of consumer fraud. The agency has brought cases against numerous companies over the years, resulting in shut-downs, fines, and refunds to consumers. At the state level, most states have anti-pyramid-scheme statutes or broader consumer protection laws that cover these schemes. Some states, like California, have specific statutes (Penal Code 327) that make it a criminal offense to participate in or promote a pyramid scheme. Are pyramid schemes legal in the US if they have products? No. The presence of a product does not automatically make a business legal. If the primary revenue comes from recruitment rather than product sales to end consumers, it is still considered a pyramid scheme. Definition: Pyramid schemes are illegal in the United States under both federal FTC law and state-level statutes. The presence of a product does not make a pyramid scheme legal if the primary revenue source is recruitment. If you suspect a business is a pyramid scheme, you can report it to the FTC and your state attorney general.

Related questions