Consumer Law at Your Fingertips
- In a “pyramid” scheme, a person pays for the right to recruit, for profit, others who pay for a similar right. The scheme promises an ever-growing “chain” or “pyramid” of recruits, in which new recruits fund payments to those already in the plan. But the exponential growth cannot be sustained and the “chain” inevitably breaks. When it does, newer recruits (those forming the broad base of the “pyramid”) lose their investment. “Pyramid” schemes may take many forms, including “chain” letters, “gifting” clubs, and some multi-level marketing plans.
- The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) regulates unfair and deceptive business practices. DATCP has adopted a rule prohibiting “pyramid” schemes (also known as “chain distributor” schemes). Violators may be prosecuted, and there is a private remedy for consumers. For more information, see Pyramid Schemes details.
- A “pyramid” scheme may be an illegal lottery, prohibited under Wisconsin Statutes section 945.02(3), because it has the elements of prize, chance and consideration. For more information, see Consumer Law topic, Prizes and Sweepstakes.