NC General Statutes

N.C. Gen. Stat. § 14-291.2 (2026)

Pyramid and chain schemes prohibited

✓ current as of July 2026

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(a) No person shall establish, operate, participate in, or otherwise promote any pyramid distribution plan, program, device or scheme whereby a participant pays a valuable consideration for the opportunity or chance to receive a fee or compensation upon the introduction of other participants into the program, whether or not such opportunity or chance is received in conjunction with the purchase of merchandise. A person who establishes or operates a pyramid distribution plan is guilty of a Class H felony. A person who participates in or otherwise promotes a pyramid distribution plan is deemed to participate in a lottery and is guilty of a Class 2 misdemeanor.

(b) "Pyramid distribution plan" means any program utilizing a pyramid or chain process by which a participant gives a valuable consideration for the opportunity to receive compensation or things of value in return for inducing other persons to become participants in the program; and

"Compensation" does not mean payment based on sales of goods or services to persons who are not participants in the scheme, and who are not purchasing in order to participate in the scheme.

(c) Any judge of the superior court shall have jurisdiction, upon petition by the Attorney General of North Carolina or district attorney of the superior court, to enjoin, as an unfair or deceptive trade practice, the continuation of the scheme described in subsection (a); in such proceeding the court may assess civil penalties and attorneys' fees to the Attorney General or the District Attorney pursuant to G.S. 75-15.2 and 75-16.1; and the court may appoint a receiver to secure and distribute assets obtained by any defendant through participation in any such scheme. The clear proceeds of civil penalties provided for in this subsection shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with G.S. 115C-457.2.

(d) Any contract hereafter created for which a part of the consideration consisted of the opportunity or chance to participate in a program described in subsection (a) is hereby declared to be contrary to public policy and therefore void and unenforceable. (1971, c. 875, s. 1; 1973, c. 47, s. 2; 1983, c. 721, s. 2; 1993, c. 539, s. 203; 1994, Ex. Sess., c. 24, s. 14(c); 1997-443, s. 19.25(x); 1998-215, s. 96.)

Notes of Decisions

Cited in 5 cases, 1972–1999 · leading case: Edmisten, Attorney Gen. v. Challenge, Inc., 284 S.E.2d 333 (N.C. Ct. App. 1981).

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Edmisten, Attorney Gen. v. Challenge, Inc., 284 S.E.2d 333 (N.C. Ct. App. 1981). · cites it 7× “2 which provides as follows: “Pyramid and chain schemes prohibited, — (a) Any person who shall establish, promote, operate or participate in any pyramid distribution plan, program, device or scheme whereby a participant pays a valuable consideration for the opportunity or chance…”

United States v. Gold Unlimited, Inc., 177 F.3d 472 (6th Cir. 1999). “100 (3) (1997); N.C. Gen.Stat. § 14-291.2(b) (1997); Ohio Rev.”

Cananwill, Inc. v. EMAR Grp., Inc., 250 B.R. 533 (M.D.N.C. 1999). · cites it 2× “§ 58-3-35 (conditions or stipulations in insurance contracts concerning jurisdiction or limitation of actions are “void”); N.”

Commonwealth v. Tolleson, 321 A.2d 664 (Pa. Commw. Ct. 1974). · cites it 2× “; N. C. Gen. Stat. §14-291.2; Tenn. Code Ann.”

State Ex Rel. Morgan v. Dare to Be Great, Inc., 189 S.E.2d 802 (N.C. Ct. App. 1972). “G.S. 14-291.2 prohibits pyramid and chain schemes such as alleged in the instant case.”

— N.C. Gen. Stat. § 14-291.2(b) — 1 case

United States v. Gold Unlimited, Inc., 177 F.3d 472 (6th Cir. 1999). “100 (3) (1997); N.C. Gen.Stat. § 14-291.2(b) (1997); Ohio Rev.”

— N.C. Gen. Stat. § 14-291.2(d) — 1 case

Cananwill, Inc. v. EMAR Grp., Inc., 250 B.R. 533 (M.D.N.C. 1999). “§ 58-3-35 (conditions or stipulations in insurance contracts concerning jurisdiction or limitation of actions are “void”); N.”

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