Compliance Risks and Prevention Strategies of Platform Rebate Models

In the internet and Web3 industry, user incentive mechanisms are becoming increasingly popular. However, the compliance of rebate mechanisms has been a subject of controversy. From the promoter’s perspective, it is a reasonable profit-sharing, but regulators may see it as “pyramid selling”. This article will clarify the boundaries between rebates and pyramid selling through case analysis and legal interpretation.

Case Analysis

A certain NFT platform divides NFTs into five levels, each corresponding to different production capacities and prices. The platform has set up a commission reward mechanism for introducing the purchase of NFTs, but it is limited to giving it to an introducer who has a higher level than the purchaser.

Legal Interpretation

According to the Criminal Law, an organization can become the subject of the crime of organizing and leading pyramid schemes. The law focuses on targeting the initiators, organizers, decision-makers, and core personnel who play a key role in pyramid schemes.

To constitute a pyramid scheme crime, it is necessary to simultaneously meet the two conditions of “fraudulently obtaining property” and “disrupting the economic and social order.” In addition, “paying fees to obtain membership eligibility” and “forming levels in order” must exist at the same time.

Criteria for Judgment

1. Source of Profit: The platform’s main revenue should come from the sale of real goods and service fees, rather than from new participants’ “entrance fees” or “head fees”.

2. Compensation Basis: The commission should be based on the actual NFT sales revenue sharing, rather than relying on the number of development personnel.

3. Organizational Structure: It is recommended to avoid forming a pyramid structure with more than three levels and to adopt a “single line direct push” model.

4. Product Value: The pricing of NFT transactions should conform to market laws, possessing real value and liquidity.

Prevention Strategies

1. It is prohibited to set up “entry fees” and “referral” mechanisms.

   • Avoid any form of mandatory “entry fee”
   • Compensation should be based on actual sales performance.
   • Clearly state that the commission comes from the actual transaction order profit.
   • Strictly distinguish between “promotion” and “referral”
   • Ensure data transparency and traceability

2. Use a “linear” one-tier reward or at most two tiers of rewards.

   • It is recommended to use “linear” first-level rebate
   • If two-tiered rewards are adopted, 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
   • Establish a sustainable profit model that does not rely on the funding of “latecomers”.
   • Promote truthfulness and pragmatism, eliminate fraud and misleading information.

Conclusion

Compliance rebates are a marketing strategy, while illegal rebates may constitute a crime. For a project to develop in the long term, it must return to the creation of real value, winning through products and services rather than relying on layers of rebates. Only by strictly adhering to legal boundaries can stable development be achieved.