The Boundary Between Platform Rebates and Pyramid Schemes: How to Design a Compliance User Incentive Mechanism

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 controversial: promoters see it as reasonable profit sharing, while regulators may view it as suspicious "pyramid selling." This article will explore the boundaries between "rebate" and "pyramid selling" by combining practical cases and judicial standards.

Case Analysis

A certain NFT platform categorizes 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 can only grant rewards to an introducer with a higher NFT level than the purchaser.

Legal Analysis

According to relevant legal provisions, the criminal subject of organizing and leading pyramid selling activities can be an entity, and its directly responsible supervisors and other directly responsible personnel will bear criminal responsibility. The law focuses on punishing the initiators, organizers, decision-makers, and core personnel responsible for planning, directing, coordinating, and other tasks who play a key role in pyramid selling activities.

It is worth noting that a crime of pyramid selling can only be recognized if both "deception for property" and "disruption of economic and social order" conditions are met. In addition, both "paying fees to obtain membership eligibility" and "forming hierarchies in order" must be present for it to constitute pyramid selling behavior in a legal sense.

1. Source of Profit

The main profit model of this NFT platform is the income from the sale of NFTs, as well as transaction fees from NFT circulation and capacity exchange, which is fundamentally different from the model in pyramid schemes that relies on new members' "entry fees" or "head fees."

2. Compensation basis

The commission for the introducer from the platform comes from the actual profit-sharing of NFT sales, which is based on real transactions and goods sales behavior, rather than relying on the number of developers or the accumulation of assets as a basis for compensation.

3. Hierarchical Structure

The platform adopts a "single-line direct push" model, with no pyramid structure above three levels. Users are not dependent on each other in a hierarchical manner; commissions are given only for a single transaction, and at most one person is rewarded. It does not possess features of "continuous income" or "multi-layer nesting."

4. Product Value

The pricing of NFT transactions conforms to market rules, and buyers generate purchasing intentions based on their pursuit of the goods and their rights. The production capacity corresponding to NFTs can circulate in the secondary market, possessing high value and long-term maintenance capability. The platform does not aim to develop downlines, and any user can directly purchase NFTs from the platform.

Suggestions to Avoid Rebate Mechanisms Constituting "Pyramid Selling"

1. Prohibit setting "entry fee" and "referral bonuses"

• No mandatory "entry fee" of any kind will be established.
• The compensation/rebate basis should be anchored on "real sales performance".

2. Adopt a "linear" single-layer reward to avoid "pyramid" multi-level rewards.

• It is recommended to adopt a "linear" level rebate.
• If multi-level rebates are adopted, a maximum of two levels of rewards are allowed, and multi-dimensional reward indicators are designed.

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
• The profit model is sustainable and does not rely on funding from "latecomers".
• Promotion and advertising should be pragmatic, eliminating fraud and misleading information.

Conclusion

The law will penetrate the "marketing tactics" packaging to determine whether it essentially constitutes "pyramid selling". Even if it formally avoids multi-level structures and entry fees, if the core is to defraud property, it may still be classified as pyramid selling. For a project to develop in the long term, it must return to real value creation: winning with products and services, rather than relying on layers of rebates to create a myth of wealth. By maintaining compliance boundaries, sustainable development can be achieved.