Compliance Boundaries of the Rebate Mechanism: Marketing or Pyramid Selling?

In today’s internet economy, whether it is traditional e-commerce, content platforms, or emerging Web3 projects, user incentive mechanisms have become common product design elements. However, the compliance of rebate mechanisms has always been controversial: promoters see it as reasonable profit distribution, while regulators may view it as suspected “pyramid selling.” This article will explore the boundary between “rebate” and “pyramid selling” through case analysis and legal interpretation.

Case Analysis

A certain NFT platform categorizes NFTs into five levels, each corresponding to different production capacities and prices. The platform adopts a single-line direct push model, providing a one-time rebate only to the users who introduce others to purchase NFTs, and the rebate can only be given to one person.

Legal Analysis

According to the criminal law, the key to organizing and leading pyramid scheme activities lies in whether there is “fraudulent acquisition of property” and “disturbance of economic and social order”. In addition, both “paying fees to obtain membership” and “forming hierarchies in order” must be satisfied simultaneously for it to constitute a pyramid scheme in the legal sense.

1. Legality of profit sources

The platform mainly profits from NFT sales revenue and transaction fees, rather than from new users’ “entry fees” or “head fees”.

2. Reasonableness of compensation criteria

The platform provides the commission for introducers based on the actual profit sharing from NFT sales, rather than relying on the number or level of development personnel.

3. Legality of Organizational Structure

The platform adopts a “single line direct push” model, which does not have a multi-level pyramid structure, and users do not rely on each other in a hierarchical manner.

4. Authenticity of Product Value

NFT pricing conforms to market rules, has actual value and liquidity, and is not aimed at developing downlines.

How to Avoid the Rebate Mechanism Being Suspected of Pyramid Selling

1. Prohibit “entry fees” and “referrals”

• No mandatory “entry fee” of any kind will be established.
• Compensation should be anchored on “real sales performance”.
• Clearly identify the source of the commission, distinguishing between “promotion” and “rebate”
• Ensure data transparency and traceability

2. Adopt a “linear” reward structure

• It is recommended to adopt a “linear” level rebate.
• If multi-level rebates are adopted, a maximum of two levels is allowed, and multi-dimensional reward indicators should be designed.

3. Ensure that transactions are real, legal, and sustainable.

• Provide authentic, valuable, and reasonably priced goods or services
• Ensure the authenticity and legitimacy of transactions.
• The profit model is sustainable and does not rely on the funds of “latecomers”.
• Promotion should be pragmatic, eliminating fraud and misleading information.

Conclusion

Compliance rebates are marketing strategies, while illegal rebates may constitute a crime. The law will penetrate the “marketing strategy” packaging to determine whether it is essentially “pyramid selling.” For a project to develop in the long term, it must return to creating real value, winning through products and services, rather than relying on layers of rebates. Maintaining compliance boundaries is essential for achieving sustainable development.