united-states currency sec
Hypothetical: Is a fully disclosed pyramid scheme legal?
<p><strong><em>I see that hypotheticals don't typically go over to well on this SE site but I'll give this a shot.</em></strong></p>

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<p><strong>EDIT: I originally posted as 'Ponzi' but I meant 'pyramid'</strong></p>

<p>Was talking with a friend tonight about a hypothetical situation and the implications of full-disclosure on law and was hoping some of you might be able to settle the debate. (This is for US law btw)</p>

<p>Suppose I launched a company called Pyramid Scheme, inc. And we were 100% direct and transparent that this was a Pyramid scheme. We literally explained word for word that it is a Pyramid scheme:</p>

<blockquote>
  <p>You can put money in and we pay you out based on the next people that put money in after you. If you are stuck on the bottom rung you will likely not see a return, THIS IS A Pyramid SCHEME.</p>
</blockquote>

<p>I know <em>(I'm pretty sure)</em> Pyramid schemes are illegal, but if you completely disclose it and are 100% open about it, is it still illegal? I'm not talking about the fine print either, I'm talking about very direct straight forward declarations, even to the point where the name of the company is 'Pyramid Scheme inc'.</p>

<p>You might get away with it under federal law.  But there are potentially also state laws to worry about.  Under <a href="http://www.statutes.legis.state.tx.us/Docs/BC/htm/BC.17.htm" rel="nofollow noreferrer">Texas law</a> 17.461:</p>
<blockquote>
<p>&quot;Pyramid promotional scheme&quot; means a plan or operation by which a person gives consideration for the opportunity to receive compensation that is derived primarily from a person's introduction of other persons to participate in the plan or operation rather than from the sale of a product by a person introduced into the plan or operation.</p>
<p>A person commits an offense if the person contrives, prepares, establishes, operates, advertises, sells, or promotes a pyramid promotional scheme.  An offense under this subsection is a state jail felony.</p>
</blockquote>
<p>As you can see, there's no requirement under this law that there be fraud involved.</p>
