Wesware Inc. v. Texas

Does the Wesware referral sales program constitute an illegal pyramid scheme or a lottery?

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The Texas Court of Civil Appeals held that Wesware was operating a lottery and an illegal pyramid sales program and that the lower court was justified in issuing a temporary injunction. The Appeals Court reasoned that because the system depended on the exponentially expanding base of purchasers, the scheme was inherently fraudulent in that saturation would eventually be reached. The Court rejected the claim that participation in the scheme was only susceptible to the usual market forces experienced by any business because success depended not on the skill of the sales force but on their luck in joining the program long before the saturation point was reached. Because luck played a strong part in determining the success of the participants, the court also held that the injunction was proper under the theory that the plan also constituted a lottery.

Case and case summary are also available online at: http://www.mlmlegal.com/legal-cases/Wesware_v_Texas.php

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Reference Info:State, 5th Circuit, Texas | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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