Photo Courtesy: Ocala Gazette
In January, Ryan Chamberlin, a Republican member of the Florida House of Representatives from Belleview, filed House Bill 249, the “Prohibition of Pyramid Promotional Schemes.”
According to HB 249, a pyramid scheme is described as “a plan or operation in which a person pays for the right to receive compensation that is based on recruiting other persons into the plan.” Essentially, a pyramid scheme is a business model in which participants gain an income from recruiting new members rather than through the selling of products and services. New members often have to pay an initial fee of up to a thousand dollars to join a pyramid scheme, which provides profit for the older members.
Although this system is proven to be unsustainable. pyramid schemes allow senior members to profit, while new recruits receive minimal to no funding. In addition, when the rate of recruitment begins to decline, many participants are left with financial losses.
According to a study released by AARP Foundation, concerning multilevel marketing and pyramid schemes, participants are usually unable to obtain financial success.
“Among the more than 20 million Americans who participate or have participated in multilevel marketing organizations, 90% say they got involved to make money. However, nearly 47% lose money and 27% make no money.”
The study states.
HB 249 explicitly prohibits individuals from establishing, promoting, operating, or participating in pyramid promotional schemes. This bill also increases the penalties faced when found guilty of participating in a pyramid scheme.
The Florida Legislature has made an attempt to address the negative impacts of pyramid schemes in the past. In 1971, the Florida Senate enacted Florida Statute 849.091, which declared pyramid schemes to be illegal, prohibiting their operation within the state of Florida.
Following this statute, thousands of lives continued to be impacted by pyramid schemes. In an article titled “My Childhood in a Multilevel Marketing Scam,” Tanja Hester reflects on her family’s involvement with a multilevel marketing scheme during her adolescence.
“Looking back, I can see now that it was all a scam, that the system was rigged to only benefit the few at the top.” Hester added. “But at the time, my parents and countless others really believed that the program could offer a quick path to wealth.”
HB 249 outlines strict enforcement mechanisms to be administered by the Department of Legal Affairs. The DLA has been tasked with overseeing any complaints regarding pyramid promotional schemes and issuing cease-and-desist orders to those operating the scheme.
If perpetrators fail to comply with the cease-and-desist orders, they have the possibility of facing fines of up to $100,000 per violation. Depending on the amount of money involved in a pyramid scheme, participants may also face first, second or third degree felony charges. A third-degree felony charge may subject a participant to serve up to 30 years in prison.
Most people remain unaware that they are involved in a pyramid scheme until it is too late. According to Devondre Fox, a Tallahassee resident, participants may not even be aware of the crime they are involved in.
“Sometimes you don’t even know you’re involved in a pyramid scheme until you’ve already lost your money,” Fox said.
HB 249 remains in the legislative process and is yet to go through the committee process. In the state of Florida, a bill must pass in both the House and the Senate before being presented to Governor Ron DeSantis for his signature.