Web3 Project Promotion Rebates: How to Avoid Violating MLM Legal Boundaries?

Introduction

User incentive mechanisms have become an important element in the design of many products, whether in traditional e-commerce, content platforms, or Web3 projects. However, the compliance of rebate mechanisms has always been a gray area: promoters see it as a reasonable profit sharing, while regulators may regard it as "pyramid selling". This article will explore the boundary between "rebate" and "pyramid selling" by analyzing real cases and judicial identification standards.

Case Study

An NFT platform categorizes NFTs into five levels, each corresponding to different production capacities and prices. The platform has a commission system for introducing the purchase of NFTs, but it only allows giving a rebate to one referrer who is at a level higher than the purchaser's NFT level. Does this model constitute a pyramid scheme crime?

Legal Perspective: Does Platform Rebate Constitute Pyramid Selling?

According to the criminal law, the main characteristics of the crime of organizing and leading pyramid selling activities include:

1. Source of profit: Is it mainly relying on "selling headcounts"?
2. Compensation basis: Is it "per capita compensation"?
3. Is a "hierarchical structure" formed?
4. Is the value of the product real?

In the above case:

1. The platform's profits mainly come from NFT sales and trading fees, rather than "entry fees".
2. The commission is based on actual NFT sales, not on the number of downline members.
3. Adopt a "single-line direct push" model, with no multi-layer nested structure.
4. NFT pricing conforms to market laws, possessing actual value and liquidity.

How to Avoid the Rebate Mechanism Being Viewed as a Pyramid Scheme?

1. Eliminate "entry fees" and "referrals"

• Prohibit setting a mandatory "entry fee"
• Compensation should be based on actual sales performance.
• Clearly state that the commission comes from actual transaction orders.
• Strictly distinguish between "promotion" and "referring people"
• Ensure data transparency and traceability

2. Adopt a "linear" one-tier reward

• It is recommended to implement a first-level rebate between direct promoters and consumers.
• If two-tier rewards are adopted, multi-dimensional reward indicators should be designed.
• Avoid patterns of infinite levels and unlimited transmission of profits

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

• Provide genuine, valuable, and reasonably priced goods or services
• Ensure the authenticity and legitimacy of the transaction
• Establish a sustainable profit model that does not rely on "latercomer" funds.
• Promote truthfully and realistically, eliminating fraud and misleading information.

Conclusion

Compliant rebates are marketing strategies, while illegal rebates may constitute a crime. For projects to develop sustainably, they must focus on creating real value, centered around quality products and services, rather than relying on layers of rebates. Adhering to legal boundaries is essential to ensure the stable development of the business.