Are Cash Gifting Programs Legal?
In the field of home money-making programs, the Internet is awash with review sites whose purpose is to subtly promote a particular money-making program while pretending to be an impartial reviewer of competing programs, which are judged as inferior or even illegal. Usually the program being promoted is a pyramid scheme, and its claim to legality is that it includes a product. As part of their pretense that the product makes a difference, they call cash gifting programs illegal because they don't have a product. Let me give you a bucket of cold water for that steaming pile of bullwhip.
My name is Shano DeLeon. I've been selling home money-making information and programs for about 35 years. I've made up to $750,000 per year from it. I've run my own programs and paid participants millions of dollars. In other words, I know more than a little about the subject.
First, I have three statements that are something like ground rules.
In a cash gifting program, members give other members cash gifts according to a set of rules. I'll use a question and answer format to address the legal and ethical concerns some people have expressed in regard to such programs.
If cash gifting programs are legal, why are people sometimes sent to prison for taking part in them?
If gifting programs are legal, why do they deal in cash?
Unless there is a good reason for an exception, I would require cash. Here's why:
How can cash gifting programs be legal when there isn't any product?
In most cases, an additional product is involved. Let's call it "product B". The promoters say, "Our program is perfectly legal because when you join, you get product B." That ruse is so common that it seems to be accepted as truth by naive opportunity seekers in general. Hence, they are suspicious of gifting programs because they don't have a product.
The authorities might be stupid, but they're not total idiots. All they have to do is look at the advertising. Does it promote the benefits of product B, or does it promote the benefit of making money with the program? The laws normally say that the restriction applies if any part of the purchase price of the product pays for the right to take part in the program. If a person is required to buy the product in order to take part in the sales program, then some part of the purchase payment does indeed pay for the right to be a sales participant and therefore it is illegal for participants to make money from those sales. (That's the strict interpretation. Enforcement varies widely. This is not legal advice.)
A person joins a well constructed cash gifting program by paying a fee to the administrator. Program members do not make money from the fee people pay to become a member. A well constructed cash gifting program has no more than two tiers, which means it cannot be a pyramid scheme or a multilevel marketing program. Furthermore, there is no need to include any deceptive or misleading claims in the program's advertising.
If those things are done in compliance with the law, the only thing left that could be illegal is the giving of the cash gifts. The act of giving a gift is perfectly legal. But someone might claim that giving within the bounds of a gifting program isn't real giving. They might claim that the giver's motives aren't what they should be. They might claim that the program really fits the law's definition of an illegal scheme.
In the final analysis, whether or not someone considers a particular gifting program to be legal depends on interpretation of laws (mostly state laws) and speculation about the contents of the minds of program members.
The laws against chain schemes in one way resemble suspects in the "war on terror": If you torture them enough, you can get them to say anything. I've seen chain scheme laws interpreted by district attorneys in ways that would make any money-making program of any kind illegal. Leaving aside tortured interpretations of ambiguous laws, I haven't seen a single good reason to judge cash gifting programs to be less legal by nature than any other membership type of money-making program. (Note: this is not legal advice.)
Is the giving in a gifting program legitimate giving?
Cash gifting programs promote the idea that they are a private club in which the people who take part are members. A good cash gifting program has the giver send the cash gift with a signed form which says that the money really is a gift, that no right of ownership is retained by the giver, and that there is no expectation of receiving something in return. The program also has a policy statement that describes member activity as the exchange of freely given gifts. In addition, the program administrator provides promotional material that describes the program's advantages over competing programs without directly saying that the purpose of taking part is to make money.
That's the bare bones setup that members have to work with, and they can make of it what they choose. For many, all they know to do is let the gifting program be merely an exercise in money transferring. But someone with that attitude misses the real potential and significance of cash gifting. It would be like thinking of Christmas as merely a gift transfer scheme that boosts retail sales. That attitude ignores the spiritual dimension.
The act of giving a gift affects what happens to a person. A substantial cash gift is an expression of one's belief and trust in the abundance of the universe and the unlimited good fortune that flows to a person who is open to it. Giving a cash gift can open the way to abundance and blessings worth hundreds of times the amount of money given.
There are religious channels on cable and satellite television with daily shows that consist entirely of talk about the blessings and good fortune you are likely to experience after sending them a gift of a thousand dollars. They say that giving them a thousand-dollar gift is like planting a seed that returns a harvest of as much as a thousand times what was planted. You can apply the same idea to a cash gifting program if you choose to. In other words, you can teach your own group in a cash gifting program to look upon the gifting activity in a way that imbues it with added value and significance.
Are cash gifts from a gifting program taxable income?
P.S. I do not promote or review any cash gifting programs or any other money-making programs except for my own Cash Flow System.