Koscot test

The Koscot test, named after a 1975 FTC decision involving Koscot Interplanetary, describes a pyramid scheme as one where participants pay money in return for the right to sell a product and the right to receive rewards for recruiting others, with those rewards unrelated to sales of product to ultimate users.

Courts still apply the test. The phrase "ultimate users" is where most disputes turn: whether participants' own purchases count as sales to ultimate users.