{"id":1454,"date":"2024-07-09T14:54:45","date_gmt":"2024-07-09T19:54:45","guid":{"rendered":"https:\/\/talkcrypto.news\/?p=1454"},"modified":"2024-07-09T14:58:11","modified_gmt":"2024-07-09T19:58:11","slug":"crypto-and-network-marketing-a-legal-impossibility","status":"publish","type":"post","link":"https:\/\/talkcrypto.news\/crypto-and-network-marketing-a-legal-impossibility\/","title":{"rendered":"Crypto\u00a0and\u00a0Network\u00a0Marketing:\u00a0A Legal\u00a0Impossibility?"},"content":{"rendered":"

This article first appeared on the Thompson Burton law firm’s website<\/a> and was written by founding partner Kevin Thompson. I believe the content is as relevant today as it was when he wrote it. <\/p>

It\u2019s time to state the obvious: Crypto + MLM = Legally Impossible.<\/p>

I\u2019m not suggesting that \u201ccrypto\u201d is bad. On the contrary, I think crypto provides exciting opportunities for all sorts of yet-to-be-discovered innovations. There are plenty of reasons for people to be distrustful and concerned with traditional finance. Crypto provides people with an interesting offramp away from traditional finance. Volatile and dangerous? Sure. But it\u2019s possible; thus, there\u2019s a place for it.<\/p>

I\u2019m not suggesting that MLM is bad. Clearly not, I\u2019ve built my career around it. But it\u2019s important to understand that when a company layers a multi-tier incentive structure around a thing (product, service, etc), it completely changes the character of the company. Instead of the company being in complete control over its message, they deputize an army of people to spread the word for them. This creates incredible leverage in the marketplace. And as we all know, leverage can be great. It can also lead to ruin.<\/p>

When a company mixes something as speculative, volatile, confusing, and exciting as crypto with a multi-tiered compensation structure, all of sudden you end up with thousands of financial experts \u201ctalking their book\u201d and promoting the next best coin (or series of coins). We should all be embarrassed by the number of crypto ponzi schemes that have been birthed inside our industry. The majority of founders that have attempted to launch crypto concepts in our industry have, at a minimum, received an SEC subpoena. There\u2019s a good portion that has been sued by the SEC. And worst, a good chunk of them have ended up in prison (or dead\/missing). The SEC has filed over 200 cases against crypto concepts, by the way (not all MLM). It\u2019s worth noting that the SEC remains undefeated. The big one, their case against Ripple and XRP, is still pending.<\/p>

Just when I think the mind virus is over, it continues. With the disaster of all markets going on today, this provides a convenient backdrop for scammers\/founders to say, \u201cInvest your money over HERE, with us, in our shiny new token where your opportunity for return is XYZ%.\u201d And people continue to fall for it.<\/p>

The late, great Jeffrey Babener put it best when he wrote MLM Cryptocurrency Scams. He said:<\/p>

Although the ultimate future of cryptocurrency is not clear, the hype and rampant speculation has brought out the \u201cget rich quick\u201d con artists to promote a variety of Ponzi and pyramid schemes, many of which are spread via a MLM-type salesforce. Actually, to call the MLM cryptocurrency salespeople a sales force is a gross misbranding. As a general matter, those spreading the word are over-zealous investors who intentionally or unintentionally \u201csuck\u201d in their friends and contacts into a future collapsing pyramid.<\/p>

Despite Jeff\u2019s clear call-out, the fraud continues. And maybe that\u2019s inevitable because greed and stupidity are in no short supply these days. But YOU are here and YOU might be interested in knowing the truth: Crypto + MLM = Legally Impossible.<\/p>

We have written extensively on the subject. I highlighted the brewing problem as early as 2015 here and here. I re-shared Jeffrey\u2019s article in 2018 here. We discussed the issues with the once-popular concept of \u201cbitcoin cloud mining\u201d here.<\/p>

The conclusion remains: when you motivate people to earn commissions just by promoting any sort of ROI\/investment opportunities, whether it be \u201ccommodities\u201d or any other token, the wheels will fall off.<\/p>

Regulatory Arbitrage<\/p>

\u201cBut Kevin, it might be illegal in America. But it\u2019s legal in Dubai. So your poor American friends are missing out.\u201d<\/p>

WRONG! In America, we have developed law that has evolved over hundreds of years. The SEC has been around since the 1930s and while they\u2019re slow at times, they\u2019re not stupid.  I agree that the SEC has been less-than-helpful when it comes to regulating cryptocurrencies in general.  I\u2019m no fan of Gary Gensler.  But remember, true crypto is all about decentralized networks.  When a network marketing company claims to have special powers regarding a particular blockchain, it\u2019s the opposite of decentralized\u2026it\u2019s CENTRALIZED.  It\u2019s this centralization that brings the tokens into the purview of the SEC or CFTC, rendering the thing un-workable in our industry.<\/p>

Are there exceptions?<\/p>

I\u2019m unaware of any. \u00a0I reserve the right to be wrong here. \u00a0But I\u2019ve been following crypto since 2013 and this industry for much longer. \u00a0And I have yet to see a marriage between the two concepts that does not resemble an ugly Frankenstein. \u00a0If there\u2019s a hint of speculation regarding the future value of the token, there\u2019s no way to legally thread that needle absent clear guidance and\/or legislation from Congress. \u00a0In the meantime, steer clear. <\/p>

\"\"<\/figure>

About Kevin Thompson: <\/strong><\/p>

Kevin Thompson is an MLM attorney, proud husband, father of four, and a Thompson Burton PLLC founding member. Named \u201cSupplier of the Year\u201d in 2014 by the Association of Multilevel Marketing, Kevin Thompson has extensive experience in helping entrepreneurs launch their businesses on a secure legal footing. Thompson serves a broad spectrum in the industry, spanning from early-stage startups to Wall Street hedge fund analysts. As seen recently on Bloomberg TV with Steve Forbes, Thompson is a thought leader in the network marketing industry.<\/p>

In a prior life, Kevin was an accomplished track athlete at the University of Tennessee, garnering all-American honors in the decathlon. Kevin developed his passion for direct sales as an Amway distributor, selling energy drinks and doing anything possible to earn extra cash while in school. With his competitive nature, Thompson was drawn to the world of working with young network marketing companies trying to make a difference by selling superior products and services through networks of people. As a DSA supplier member, Kevin Thompson is actively involved in helping steer the industry into a promising future. He has served as a keynote speaker for clients all across the world.<\/p>

While Thompson appreciates working with great companies selling incredible products, he\u2019s pragmatic enough to realize that the industry needs improvement. Thompson has led several efforts to improve the network marketing industry from the inside out. These measures include the passing of state legislation regarding anti-pyramid rules, publicly denouncing inventory loading practices, conferring with multiple trade association boards to steer policy, and educating the community on best practices.<\/p>","protected":false},"excerpt":{"rendered":"

This article first appeared on the Thompson Burton law firm’s website and was written by founding partner Kevin Thompson. I believe the content is as relevant today as it was when he wrote it. It\u2019s time to state the obvious: Crypto + MLM = Legally Impossible. I\u2019m not suggesting that \u201ccrypto\u201d is bad. On the […]<\/p>\n","protected":false},"author":9,"featured_media":1456,"comment_status":"open","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,12],"tags":[],"class_list":["post-1454","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-legal"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t