Because members of an MLM make more money the more people they recruit to sell underneath them, many people point out that the sales hierarchy looks a whole lot like a pyramid. What differentiates an illegal pyramid scheme from an MLM, however, is that where it comes to MLM companies, members are selling an actual product or service, not simply being paid to recruit people underneath them. 

Even though it is legal, MLM gets a bad rap for a pretty good reason; not many MLM sellers ever actually turn a profit (via Fundera). Those who work for MLMs are always touting how they get to make money on their own time and that they use their MLM business as a "side hussle" or to bring more money into their households. But the truth of the matter is, according to a study by AARP, only 25% or people who sell for MLMs ever make a profit. And only 27% break even after selling the inventory that they have to buy upfront. Meanwhile, a whopping half of MLM sellers actually lose money while working for an MLM because they never sell enough product to make up for the startup costs and up-front inventory purchases that are often required. 

For this reason, many people feel MLMs are unethical and are not upfront and honest about the very real financial risk involved with joining a sales team.