PayPal recently added the following proviso to their terms of service:

Multi-Level Marketing Multi-level marketing plans, also known as “network” or “matrix” marketing, include any business in which a person receives proceeds from his or her own sales of goods or services, of recruited members, or any combination thereof. Similarly, PayPal prohibits as a Multi-Level Marketing plan any business in which payouts occur at two or more levels (both by the individual who actually sold the product as well as by the person(s) “upline” that recruited the selling individual).

While we know of some affiliate programs with 2 tiers which are trying their best to convince themselves and others that the new rule doesn’t apply to them (“we only have two tiers, so MLM rules don’t apply to us”), others are scrambling to pay their affiliates via other means.

This is worth paying attention to not just for affiliate managers, but also for affiliates themselves: it’s not just sending, but also receiving MLM payments that is now prohibited. So if your favorite tiered affiliate program continues to pay you via PayPal, it’s not just their PayPal account that is at risk, but yours too!

Don’t say we didn’t warn you…