Legislation under consideration by New Jersey lawmakers would make it a crime to promote and participate in pyramid promotional schemes.
Compensation for participants in those schemes is based on recruiting other people, and those who don’t join initially end up losing money.
Brian Bennett with the Direct Selling Association said having a specific law prohibiting the rackets in the Garden State would help consumers and legitimate businesses.
“New Jersey is unique … you don’t have a specific legal definition of a pyramid scheme or a pyramid chain promotional scheme,” he said Wednesday. “So this legislation is really needed to protect the public from pyramid schemes and guide legitimate direct-selling companies on what constitutes acceptable business practices.”
Bennett said the legislation could also help put an end to those schemes.
“This legislation would give law enforcement in New Jersey more guidance in identifying and prosecuting pyramid schemes,” he said. “Nobody wins when there are pyramid schemes, not legitimate direct selling companies, especially not consumers.”
If the bill advanced by the Assembly’s Consumer Affairs committee becomes law, promoting or marketing a pyramid scheme would be punishable by up to five years in prison. Knowingly participating could result in up to 18 months behind bars.
The legislation specifically exempts direct-sales companies that base their compensation on sales of goods or services.