Web3 Project Promotion Rebate Mechanism: Legal Risks and Compliance Recommendations

In today's digital economy, whether it's traditional e-commerce, content platforms, or Web3 projects, more and more product designs incorporate user incentive mechanisms. However, the compliance boundaries of the rebate mechanism have always been a vague area. For promoters, this is a reasonable profit-sharing; but in the eyes of regulators, it can sometimes be seen as a "pyramid scheme" suspicion.

This article will clarify the boundaries between "rebate" and "pyramid selling" by combining real cases and judicial identification standards, and discuss whether the platform's rebate really violates the red line of "organizing and leading pyramid selling activities."

Case Study

A certain NFT platform categorizes NFTs into five levels, each corresponding to different production capabilities and prices. The platform offers different levels of commission rewards for introducing the purchase of NFTs, and the commission can only be given to a referrer whose level is higher than that of the purchaser.

Legal Perspective: Does platform rebate constitute pyramid selling?

According to relevant legal provisions, an organization can become the criminal subject of organizing and leading pyramid selling activities. The law focuses on targeting the initiators, organizers, decision-makers, and core personnel responsible for planning, commanding, coordinating, and other tasks who play a key role in pyramid selling activities.

It is worth noting that such behavior can only be identified as a pyramid scheme crime if it meets the prerequisites of "fraudulent acquisition of property" and "disturbing the economic and social order." In addition, both "paying fees to obtain membership eligibility" and "forming hierarchies in order" must be satisfied simultaneously to constitute a legally defined pyramid scheme.

1. Profit Source Analysis

The main profit model of the platform is the income from the sale of NFTs, as well as transaction fees from NFT circulation and capacity exchange, with profits derived from real goods sales and service fees. This is fundamentally different from traditional pyramid schemes where the "entry fee" or "head fee" paid by new members serves as capital accumulation.

2. Compensation basis assessment

The platform's commission for introducers comes from the actual profit-sharing of NFT sales. This is based on real transactions and sales of goods, which is different from traditional pyramid schemes that rely on the number of personnel developed as the basis for compensation.

3. Hierarchical Structure Analysis

The platform adopts a "single line direct push" model, without a pyramid structure beyond three levels. Users do not rely on each other in a hierarchical manner; commissions are only provided for a single transaction, and at most one person is rewarded. It does not possess the characteristics of "sustained income" or "multi-layer nesting."

4. Product Value Assessment

NFT trading prices conform to market laws, and purchases are based on the pursuit of goods and their rights. The production capacity corresponding to NFTs can circulate in the secondary market, holding significant value. The platform does not aim to develop downlines; any user can purchase directly from the platform.

Suggestions to avoid the rebate mechanism being regarded as "pyramid selling"

1. Prohibit "entrance fee" and "recruiting heads"

• No mandatory "entry fee" of any kind will be established.
• The compensation/rebate basis should be anchored on "actual sales performance".
• Clarify the source of the rebate and strictly distinguish between "promotion" and "referral".
• Maintain data transparency and traceability

2. It is recommended to adopt a "linear" one-level reward

• Promoters can only earn rebates from the consumption of users they directly refer.
• If multi-layer rebates are adopted, a maximum of two levels of relationships are allowed, and multi-dimensional reward indicators are designed.

3. Ensure transactions are authentic, legal, and sustainable

• Provide genuine, valuable, and reasonably priced goods or services
• Ensure the authenticity and legitimacy of the transaction
• The profit model should be sustainable and not rely on funding from "later entrants".
• Promotion and marketing should be pragmatic, eliminating fraud and misleading information.

Conclusion

The law will penetrate the "marketing methods" packaging to determine whether it essentially constitutes "pyramid selling." Even if it formally avoids multi-level and entry fees, if the core is to deceive assets, it may still be classified as pyramid selling. For a project to develop sustainably in the long term, it must return to the creation of real value: succeeding with products and services rather than relying on layers of rebate wealth myths. Maintaining compliance boundaries is essential for achieving sustainable development.