Securities Law

There are three good reasons to subject pyramid schemes to the rigors of security laws that I can see:

1. First, securities are required to be registered with the Securities Exchange Commission and are required to be made available to investors if they ask. Most legitimate MLM programs do this: in fact, you can read Amway's SEC filing at , with a cogent critique of what it means. The risks of investing have to be carefully spelled out and disclosed to the public. This will discourage fly-by-night operators.
2. Investment brokers must be registered with the SEC. If someone tries to sell you an investment contract and they aren't registered, they're committing a crime. This means that initiating recruitment schemes designed to expand the MLM is strictly limited to certain people or certain activities. Pyramid schemes don't care how you get the suckers in, just that you get as many of them in, fast, as you can. Securities laws forbid this.
3. Anti-Fraud provisions. Then there's the catch-all anti-fraud provisions that makes fraudulently selling an investment contract illegal. This provides a backstop in case the scheme complies with the law on paper and then goes out and lies like a cheap rug to all its prospective

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