When Does an Ambassador or Referral Program Cross Into an Illegal Pyramid Scheme?

The legal test: when is it an illegal pyramid scheme?

Pyramid schemes are banned under section 24 of Denmark's Gambling Act (spilleloven), most recently consolidated in lovbekendtgørelse nr. 1182 of 2025 (retsinformation.dk). The provision defines a pyramid scheme as a pyramidically structured arrangement where three conditions are all met: (1) participation requires an entry contribution of money or other economic value, (2) participants are offered the prospect of economic gain, and (3) that gain derives mainly from the contributions of participants who join later — in other words, from recruitment, not from selling a real product.

Spillemyndigheden, Denmark's Gambling Authority, supervises and enforces this ban. Anyone offering a pyramid scheme can be punished with a fine or imprisonment of up to 4 months — up to 2 years under aggravating circumstances (section 59(4)). Criminal liability applies even if the scheme is offered from abroad to people resident in Denmark.

The operative word is mainly. A program where an ambassador both sells the product themselves and earns a small share from people they've introduced to the program isn't automatically a pyramid scheme just because of that — but the larger the share of earnings that comes from recruitment rather than actual sales, the closer the program sits to the line.

A second, separate rule: the marketing law's always-unfair blacklist

Even a program that doesn't meet all three of the Gambling Act's conditions can still be illegal under a completely different provision. Annex 1, item 14 of the Marketing Practices Act (markedsføringsloven) — Denmark's transposition of item 14 in Annex I to the EU's Unfair Commercial Practices Directive (2005/29/EC) — states that it is always considered an unfair commercial practice to establish, operate or promote a pyramid promotional scheme where the consumer pays for the opportunity to receive compensation that is derived primarily from introducing other consumers into the scheme rather than from the sale or consumption of products. Forbrugerombudsmanden, the Consumer Ombudsman, enforces this part — through civil injunctions and fines, on a separate track from Spillemyndigheden's criminal enforcement.

The Court of Justice of the EU has clarified the test further: a scheme can still be caught by the prohibition even if the link between new members' contributions and the payouts to existing members is only indirect. That means a business cannot structure its way around the ban simply by inserting an extra step between the contribution and the payout.

Even a lawful structure can still break marketing law on a separate point

Section 13 of the Marketing Practices Act requires a business to be able to document the accuracy of factual claims made in its marketing. A promise about how much an ambassador or participant can earn is a factual claim, exactly like any other figure used in marketing — and must therefore be documentable if it's made. A program can pass the Gambling Act's three-part test entirely and still breach marketing law if, for example, it advertises an unrealistic or undocumented earnings potential to attract new ambassadors.

Lawful referral or ambassador program, or illegal pyramid scheme?

Why this is live enforcement territory right now

On 31 March 2025, Forbrugerombudsmanden announced a new authority collaboration together with Finanstilsynet (the Financial Supervisory Authority), Spillemyndigheden and Skattestyrelsen (the Tax Agency), specifically targeting "finfluencere og pyramidespil" (financial influencers and pyramid schemes). The four authorities now share information faster across their respective areas — Finanstilsynet watches investment tips, Spillemyndigheden supervises pyramid schemes, Forbrugerombudsmanden enforces marketing law, and Skattestyrelsen ensures correct taxation. The background is a rise in cases where influencers market products or "investment opportunities" that a consumer can't easily see through to tell whether they're really a pyramid scheme. This isn't a theoretical risk — it's an area four Danish authorities are actively watching together, right now.

Worked example: reading an ambassador program's own numbers

The figures below are hypothetical, for illustration only, and do not describe a real Make Influence program or customer.

Program A (referral program): An existing customer gets a unique link. A friend who buys through that link gives the customer 10% of the friend's first order, once. There's no fee to get the link, and the earnings come 100% from the friend's actual purchase. The spilleloven section 24 test doesn't even come into play here: no entry contribution, no multi-level structure.

Program B ("founding ambassador" tier): A new ambassador pays DKK 500 for a "starter kit" to be onboarded. The ambassador earns 10% on their own sales, but also 5% of the sales made by every ambassador they personally recruit — and the program advertises that "the biggest earnings come from building your own team." One month's numbers for a single ambassador in Program B: their own sales generate DKK 2,000 in commission, while commission from the five ambassadors they've recruited generates DKK 8,000. Total earnings are DKK 10,000, of which 80% comes from other participants' contributions/activity and only 20% from the ambassador's own sales. That is exactly the pattern the word "mainly" in spilleloven section 24 targets, and the program's DKK 500 starter fee separately satisfies the entry-contribution condition. The program sits close to, or inside, the definition of an illegal pyramid scheme — regardless of whether it calls itself an "ambassador program."

A checklist before you structure a referral or ambassador tier

• No fee to join or to become "active." A real entry contribution is the first of the Gambling Act's three conditions.
• Commission is paid on the ambassador's own tracked sales, not on other participants' contributions or activity.
• No multi-level payout, where earlier ambassadors automatically earn on newer ambassadors' sales.
• A real product or service that is also sold to ordinary customers outside the program.
• Every earnings figure used in marketing the program can be documented — or left out entirely if it can't.
• The compensation model is written down openly in the agreement, not only explained verbally to new ambassadors. See what to put in an influencer contract.

Make Influence's perspective

Make Influence's own model is deliberately single-tier: every creator's commission is settled on that creator's own tracked sales through their own tracking link — not on whether the creator has introduced other creators to the platform. There's no "refer a friend" bonus in our commission model, and the service fee (typically 15-30% of the creator's commission, depending on deal type) is the same regardless of how many other creators a given profile knows. That's a structural choice about how we build our own model — not a legal conclusion about any other platform's model — but it's exactly the kind of structure spilleloven section 24's test and the marketing law's Annex 1, item 14 are built to watch for.

FAQ

Is MLM (multi-level marketing) illegal in Denmark?

No, not automatically. An MLM program is only illegal if it meets the Gambling Act's three-part pyramid-scheme test — in particular, that earnings come mainly from other participants' contributions rather than from real product sales. Many MLM structures are lawful because most of the earnings realistically come from sales.

Can an ambassador earn commission on people they've recruited into the program?

It can be lawful within limits, but the larger the share of total earnings that comes from that, the closer the program sits to the Gambling Act's line. A program where recruitment is the primary path to higher earnings is a red flag regardless of what the program is called.

What's the difference between an affiliate program and a pyramid scheme?

An affiliate program pays exclusively based on tracked sales to an ordinary customer — never based on whether the affiliate has recruited other affiliates. See affiliate influencer marketing: how the model works for the full mechanics.

Does a "starter kit" fee count as an entry contribution under the Gambling Act?

Yes, if the fee has real economic value and is a condition of participating. A symbolic or free membership doesn't satisfy the entry-contribution condition.

Who enforces the rules — Forbrugerombudsmanden or Spillemyndigheden?

Both, on separate legal bases. Spillemyndigheden enforces the criminal ban in spilleloven section 24. Forbrugerombudsmanden enforces the marketing law's blacklist civilly. A program can in theory be caught under one basis without the other, but in practice the two typically overlap.

Do the same rules apply to an ordinary ambassador program with no recruitment commission?

No. A program where every ambassador is paid solely for their own content and their own tracked sales — as described in how to run an influencer ambassador program — fails neither the Gambling Act's test nor the marketing law's pyramid test, because there's no recruitment-driven earnings to test.

Is a free "give a friend a discount" code covered by the same rules?

No. An ordinary referral discount with no entry contribution and no multi-level structure doesn't meet the Gambling Act's entry-contribution requirement and isn't covered by the marketing law's Annex 1, item 14. That kind of program raises a different set of questions instead, around disclosure — see disclosure rules in Denmark and the EU.

Is a fee-based competition or prize draw the same as a pyramid scheme?

No, that's a separate part of the Gambling Act. A competition or prize draw has its own rules on permits and prize tax, distinct from the pyramid-scheme ban — see how to run an influencer giveaway or contest, legally.

Can CPC or CPL payments to influencers resemble a pyramid scheme?

No, that's a different risk from a pyramid scheme — CPC/CPL pays for an action from an ordinary consumer, not for recruiting new paying participants. See pay per sale, per click or per lead for the differences between the payment models.

Does a university campus ambassador program raise the same pyramid-scheme risk?

Only if it pays ambassadors mainly for recruiting other ambassadors rather than for their own presence or sales — most documented campus programs (Red Bull, Kendra Scott) don't. See university campus brand ambassador programs: how they work and whether they fit Denmark for how that format is typically structured.