What is the difference between an MLM and a pyramid scheme?
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MLM stands for Multi-Level Marketing, which is a legitimate business model in which a company sells its products or services through a network of independent distributors. Distributors are compensated based on their own sales and the sales of their downline (the distributors they recruit). A pyramid scheme is an illegal business model in which participants pay money to join the scheme and are promised a return on their investment. The money paid by new participants is used to pay off earlier participants, and no real products or services are exchanged. Pyramid schemes are illegal because they are unsustainable and eventually collapse, leaving most participants with nothing.
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