Basically, there are three ways startup MLM tries to raise the initial capital from its members:
1) Affiliates pay a LARGE fee, say, $50K, to join as the first dozen or so affiliate, i.e. "master positions"
2) Affiliates pay a LARGE fee, say, $50K, to buy a portion of company's future revenue, say, 1% pool
3) Affiliates pay a smaller fee for "beta access" to the system and its products/services
To put it plainly, the first two are ILLEGAL because they will be considered "securities" by the SEC, and since a startup would not have registered with the SEC, they will be operating ILLEGALLY.
Remember, SEC goes after fake investments and investments that insist they are not investments. They got Ad Surf Daily ponzi, and Zeek Rewards Ponzi mainly on the "investment that lies about itself".
The third one is a bit more "iffy", as it should be an actual data access, not merely paying in to secure a spot with nothing else to show for it. Otherwise, it may still be hit by state level law enforcement, if not by the SEC.
Read it at
http://themlmattorney.com/can-startup-mlms-sell-positions-to-fund-their-businesses/
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