Before you pay a starter fee, know what your country bans and the refund rights you already have.
This in-depth guide covers everything you need to know about mlm laws by country: us, uk, malaysia and more. Based on verified income data and real-world case studies from our database of 138 side hustle tactics.
MLM is legal in the US, the UK, Malaysia, Canada and Australia, and all five ban pyramid schemes that pay mainly for recruiting. What changes from country to country is how much protection you get. The UK gives participants a 14-day right to cancel and get their money back, Malaysia requires every direct sales company to hold a licence you can check online, and in the US the strongest buyback rights come from state laws such as Massachusetts and an industry code. Know your rights before you pay a starter fee, because they are easier to use in the first weeks.
Before you sign anything
The recruitment message usually arrives at a hopeful moment. A new baby and no childcare. A job that does not pay enough. A friend who seems to be doing well, posting from a holiday you could never afford. You want something of your own, and the offer feels like a door opening.
You can walk through that door with your eyes open. Every country on this page has written rules about what an MLM may and may not do, and most give you a way to change your mind and get money back. People rarely use these rights because nobody tells them they exist. Your sponsor may not know about them either.
Question to sit with: if you needed your money back in three months, would you know who to write to and what law to quote?
The five countries at a glance
| Country | Pyramid schemes | Your cancellation right | Buyback of stock | Where to check or report |
|---|
| United States | Illegal under the FTC Act and state laws | 3 business days for covered sales of $25 or more at home, or $130 or more elsewhere (FTC Cooling-Off Rule) | 90% under some state laws, such as Massachusetts and Wyoming; 90% within 12 months under the DSA code for members | ReportFraud.ftc.gov and your state attorney general |
| United Kingdom | Banned by the DMCC Act 2024, Sch 20 para 16 | 14 days with full refund (Trading Schemes Regulations 1997) | Goods bought in the 90 days before you leave, at the price paid less deterioration and a reasonable handling charge | DSA UK for member companies |
| Malaysia | Banned under Act 500, s.27B | 10 working days for direct sale contracts | At least 90% within 6 months, as described by MIDA | KPDN licence list |
| Canada | Criminal offence under Competition Act s.55.1 | Not covered in this guide | Lack of a buyback "on reasonable commercial terms" is one sign of pyramid selling | Competition Bureau |
| Australia | Offence under ACL s.44 | Not covered in this guide | Not covered in this guide | ACCC |
The sections below give the detail and the exact wording, so you can quote it if you need to.
United States
What is banned
There is no single federal MLM statute. The FTC treats a pyramid scheme as an unfair or deceptive practice and uses the test from its 1975 Koscot decision: participants pay for the right to sell a product and for "the right to receive in return for recruiting other participants into the program rewards which are unrelated to the sale of the product to ultimate users". Our guide to MLM vs pyramid schemes explains how courts apply it.
Many states add their own laws. Michigan, for example, makes promoting a pyramid scheme a felony punishable by up to 7 years and up to $10,000 per violation.
There is still no federal rule specifically on MLM earnings claims. The FTC announced a proposed earnings claim rule for MLMs in January 2025, but the Commission's own regulatory agenda says it was "publicly released, but never published in the Federal Register", and it remains at the pre-rule stage.
Your buyback rights
Some states require MLMs to buy back unsold product at 90% of what you paid. Four examples, each checked against the statute:
Outside those laws, the industry's own rule applies to members of the Direct Selling Association. Its Code of Ethics requires repurchase of marketable inventory, kits and sales aids "within twelve (12) months from the salesperson's date of purchase at not less than 90 percent of the salesperson's original net cost" when a seller leaves. It is a code of conduct, and the FTC's staff guidance warns that buybacks "do not shield an unlawful pyramid scheme" and can be hard to use in practice. Washington's Attorney General said this happened at LuLaRoe, where "many retailers did not receive the promised 90 percent, and some received no refund at all".
Your cancellation rights as a buyer
The FTC's Cooling-Off Rule lets you cancel some purchases until midnight of the third business day. It covers sales of $25 or more made at your home, and $130 or more at temporary venues such as hotel rooms, convention centres and restaurants, or at your workplace. The seller must refund within 10 business days. It was written for in-person sales and excludes sales made entirely by mail or phone, so do not count on it for orders you place online.
For autoship, the federal law on online subscriptions (ROSCA) requires sellers to provide "simple mechanisms for a consumer to stop recurring charges". The FTC's broader click-to-cancel rule was vacated by the Eighth Circuit on July 8, 2025, and as of October 2026 no replacement has been adopted. If you were charged after cancelling, the CFPB says you must send a written billing error notice to your card company within 60 days of the statement that showed the charge.
Where to report
The FTC directs consumers to ReportFraud.ftc.gov and their state attorney general.
United Kingdom
What is banned
Since 6 April 2025, the Digital Markets, Competition and Consumers Act 2024 lists "establishing, operating or promoting a pyramid promotional scheme" as a banned practice (Schedule 20, paragraph 16). It defines one as a scheme where a consumer pays "for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the supply or consumption of products." This replaced the equivalent rule in the Consumer Protection from Unfair Trading Regulations 2008, which were revoked the same day.
MLMs in the UK are also "trading schemes" under Part XI of the Fair Trading Act 1973, which is still in force, and the Trading Schemes Regulations 1997.
Your rights as a participant
The Trading Schemes Regulations 1997 give you some of the strongest rights on this page:
- 14 days to cancel. Your contract must state your right to cancel "within 14 days of entering into the agreement without penalty and with the right to recover any monies which he had paid". Goods bought in that period can be returned with "no handling charge".
- Leave at any time. You can end the agreement "at any time without penalty by giving 14 days written notice to the promoter".
- Buyback when you leave. You can return "any goods the participant has purchased within a period of 90 days prior to such termination". If you end the agreement, you get back the VAT-inclusive price you paid, less any drop in value caused by deterioration that you caused and "a reasonable handling charge". If the company ends it, you get the full price plus your costs of returning the goods. Goods the company does not already hold must be collected within 21 days at its expense.
- No big payments in the first week. A company may not take more than £200 from a new participant until 7 days after the contract is made.
The law also requires warnings in adverts and contracts, including: "Do not be misled by claims that high earnings are easily achieved." Immediately above where you sign, the contract must say: "If you sign this contract, you have 14 days in which to cancel and get your money back." If your contract does not carry these words, ask why.
The statute does not mention 90%. That figure comes from the Direct Selling Association UK's Code of Business Conduct (effective June 2025), which binds its member companies. It refunds all joining money if you leave within 14 days, buys back stock bought more than 90 days but within a year before you leave at the price paid less commissions and bonuses, any amounts you owe and a handling charge of up to 10%, if you return it within 14 days of leaving, and sets the refund at 90% of the price paid where the 1997 Regulations do not apply. Joining or renewal fees paid in the 30 days before you leave are fully refundable. The DSA's codes are enforced by its own independent code regulator.
Malaysia
A licence is required
Under the Direct Sales and Anti-Pyramid Scheme Act 1993 (Act 500), "no person shall carry on any direct sales business unless it is a company incorporated under the Companies Act 1965 and holds a valid licence" (section 4). A company that trades without one faces a fine of up to RM1 million for a first offence. An individual faces up to RM250,000, up to five years in prison, or both.
You can check a company yourself. The Ministry of Domestic Trade and Cost of Living (KPDN) publishes a list of companies holding a valid direct sales licence, with licence numbers and expiry dates. It showed about 409 active licences when we checked on 25 October 2026. KPDN also publishes a list of revoked licences. If the company recruiting you is on neither list, stop and ask why.
Pyramid schemes are banned, with heavy penalties
Section 27B says: "No person shall promote or cause to be promoted a pyramid scheme." For a company, the fine is RM1 million to RM10 million for a first offence. For an individual, it is RM500,000 to RM5 million, up to five years in prison, or both.
The Act's schedule lists features of a pyramid scheme. Two are useful when you assess a plan: when a buyback of currently marketable goods on reasonable terms "is not allowed or provided for", and when "withdrawal by participants ... is not allowed".
Your cooling-off and buyback rights
If you buy through a direct sale (door-to-door, mail order or an electronic transaction), you have a cooling-off period of ten working days, starting the day after the contract. The contract must carry the words "THIS CONTRACT IS SUBJECT TO A COOLING-OFF PERIOD OF TEN WORKING DAYS". To cancel, serve a written notice on the seller by hand or by registered post before the period ends. A posted notice counts as served three days after posting.
For participants, the Malaysian Investment Development Authority describes the Direct Sales (Scheme and Conduct) Regulations 2001 this way: you get at least 10 working days from recruitment to cancel your membership with a full refund, and the company "shall buy back any marketable goods sold to the participant within the period of 6 months after goods purchase date, at the price not less than 90 per cent of the amount paid". We could not fetch the Regulations themselves, so treat this as the government's summary and confirm with KPDN.
Why this matters so much in Malaysia
Relative to the size of its economy, Malaysia has more direct selling than any of the 63 countries in the industry's global report. The World Federation of Direct Selling Associations' 2024 report ranks Malaysia fifth in the world by sales, at RM46.7 billion (US$10.2 billion), and first of 63 countries for direct sales as a share of GDP, at 2.417%. It counts 9,609,326 people in Malaysian direct selling. That headcount uses the industry's broad definition, which includes people who joined only for a discount and "others who join but just never become active", so it counts many people who do not run a business at all.
Question to sit with: with that many people in, how many of the people in your own contacts list have already been asked?
Canada
Canada regulates both earnings claims and pyramid selling in its Competition Act.
Section 55 forbids anyone from talking about MLM compensation without "fair, reasonable and timely disclosure" of "compensation actually received by typical participants in the plan" or compensation they are likely to receive. The company is responsible for what its participants say.
Section 55.1 defines "a scheme of pyramid selling". A plan falls under it if any of these apply:
- participants are paid for recruiting
- a product purchase is required to join, other than sales aids sold at cost
- participants are supplied with commercially unreasonable amounts of inventory
- a participant has no buyback guarantee or right to return saleable product "on reasonable commercial terms", or is not told about it
The Competition Bureau says pyramid selling "is illegal and constitutes a criminal offence in Canada". Penalties under both sections reach a fine at the court's discretion and up to five years in prison on indictment, or up to $200,000 and one year on summary conviction.
Australia
The ACCC puts the line simply: "In pyramid schemes, people in the scheme only make money from the recruitment of other people. In multi-level marketing schemes, people in the scheme make money from selling a genuine product or service." It is against the law to take part in a pyramid scheme or to persuade someone else to.
Under section 44 of the Australian Consumer Law, the Legal Services Commission of South Australia's Law Handbook gives maximum penalties of $2.5 million for an individual. For a corporation the maximum is the greatest of $50 million, three times the benefit obtained, or 30% of adjusted turnover.
The ACCC also says: "We don't resolve individual complaints".
What to do with this
Save the rule for your country before you sign. If you are in the first 14 days in the UK, or the first 10 working days in Malaysia, you may be able to cancel and get your money back in full. If you are past that, the buyback rules above are your starting point, and how to leave an MLM and recover money walks through the steps.
If you are still deciding whether to join, run the company through the checklist for evaluating an MLM, read its income disclosure statement, and check the red flags. You can test your likely profit with the MLM profit calculator. And if you decide the odds are not for you, your goal of your own income still stands: the alternatives with better odds include selling online through live shopping and tutoring, which need no starter kit. The honest guide to MLM and direct sales has the full series.
This page summarises published laws, regulations and regulator guidance as of October 2026. It is general information, not legal advice. Laws change and their application depends on your facts, so confirm with the regulator named above or a qualified adviser before relying on it.