Does PayPal prohibit transactions for pyramid, matrix, and multi-level marketing programs?

Yes. To determine if transactions violate this policy, PayPal considers these factors:

  • Commissions offered to recruit new members
  • Requirements for new distributors to purchase costly inventory or "start-up kits"
  • Members' profits derived from recruiting new members or from the sales of newly-recruited members ("downline") rather than their own sales
  • Payouts from fees or contributions paid by new or existing members
  • Money paid into the system that is significantly greater than money paid out
  • Unrealistic or unsupported promises regarding profits or return on investment
  • Percentage of the company's goods sold by a non-distributor
  • Flow of money derived from new members predominantly moves "upline"
  • Preservation of the business rests on the exponential growth of new members or customers
  • Offers of speculative real estate or non-development property
  • Business functioning as an auto-surf investment program or a high-yield investment program
  • Warnings from governmental agencies about the business model

PayPal defines these programs as follows.

Pyramid schemes – Existing members receive payouts funded by new payments into the program from new member fees or existing member contributions.

Matrix programs – Individuals pay primarily to be added to a waiting list for a product. The individual at the top of the list receives the product only after a set number of people have joined after that individual.

"Get rich quick" schemes – Include any type of self-employment, start-up business, or investment opportunity where the claims of profit or returns on investment are unrealistic or unsupported.

Multi-level marketing programs – Individuals receive proceeds from their sales of goods or services and from those of recruited members. PayPal generally prohibits multi-level marketing programs that offer payouts to both the seller and the individual(s) who recruited the seller. PayPal reserves the right to permit certain multi-level marketing programs at its sole discretion.