In a skill contest , you have to know the answers to questions or how to do something. You may have to pay a fee or buy merchandise to enter. Multi-level marketing plans , which can be legal, are ways to sell goods or services through distributors. Pyramid schemes , which are illegal, focus on the commissions you earn just for recruiting new distributors. They ignore the marketing of products or services.
Most states outlaw pyramiding.
Because plans that pay commissions for recruiting new distributors inevitably collapse when new distributors can't be recruited. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel , a secure, online database available to hundreds of civil and criminal law enforcement agencies U.S. and abroad.