TO SOME young adults, Vemma Nutrition looked like a path to wealth—the chance to sell energy drinks, recruit other sellers and, according to a company video, enter a world of private planes, fast cars and pretty women. To America’s Federal Trade Commission (FTC), Vemma looked like a pyramid scheme. In September a judge barred Vemma from conducting its main business while the FTC makes its case in court. The FTC’s suit is, however, relatively rare. Pyramid schemes remain devilishly hard to identify. Nearly three years ago Bill Ackman bet $1 billion that Herbalife, a multi-level marketing company (MLM) selling nutrition products, was a pyramid scheme. The hedge-fund manager is still arguing his case. But a broader fight is brewing. Some industry observers want new rules to spot pyramid schemes. On October 21st the Direct Selling Association (DSA), the lobby for MLMs, went to Capitol Hill to eviscerate the idea; its members have the benefit of a congressional caucus, formed in September to support the interests of the multi-level marketers. At issue is a simple question: what is a pyramid scheme?

No national law or regulation offers a definition. When the FTC alleges a pyramid scheme, it cites a law against “unfair or deceptive” practices. It has brought successful cases against pyramids, but there is ample debate over the implications of those rulings (and some rulings conflict with individual states’ definitions).

The trick is distinguishing a legitimate MLM, a type of direct seller, from a scam. MLMs do business globally, but the world’s biggest, such as Amway, Avon and Herbalife, are American. They sell all kinds of products; supplements, energy drinks and lotions are among the most common. What differentiates these firms is their unusual business models. They sell products to independent distributors and reward them for hawking their wares and finding further recruits.

Most of these firms are privately held, making them harder to understand. What data do exist suggest that they have substantial sales but an outsized number of sellers. The lobby group reports that direct sales, mostly by MLMs, reached $34 billion last year, up 16% from 2004 (see chart). However, the number of those at some point involved in the business grew at twice that pace, reaching 18m people in 2014, or one in 13 American adults. Just 12% of these earned more than $25,000 in 2014 and 62% earned less than $6,000. That does not account for expenses, such as purchases of the companies’ products.

Such figures suggest this is a poor way for most people to make money—but they do not make MLMs pyramid schemes. In the simplest version of such a scheme, distributors pay a firm for the opportunity to recruit other distributors, so that they can receive a cut of their earnings. The company’s revenue comes mainly from recruitment, not from selling services or products. The scheme transfers money from losers at the bottom of the pyramid to winners at the top.

In reality scams are usually far more complex. The main debate is whether scant sales to the public make a company a pyramid scheme. In 1979 a court deemed Amway to be legitimate thanks to certain policies, such as requiring distributors to sell most of the products they had bought. Since then many firms have adopted similar policies, though some either fail to enforce them or adhere to perverted versions. “I could have a company that follows Amway 100% and you still have pyramiding taking place,” admitted one lawyer for MLMs.

Peter Vander Nat, a former economist for the FTC, and William Keep, of the College of New Jersey, want new regulation to define a pyramid scheme clearly. A pyramid would be a company based primarily on recruitment, with most sales made not to the public but to distributors who enter the scheme to try to earn rewards mainly by enlisting others. But the DSA has gone to Congress to fight the idea; it commissioned a report to rebut the notion that meagre retail sales imply a pyramid scheme. Joe Mariano of the DSA argues that many distributors are simply seeking discounts on products they like. “The legal analysis should be: is the product being used by real consumers?” he argues. Whether the consumer is a distributor is immaterial, he says.

Pershing Square, Mr Ackman’s hedge-fund firm, says it is not involved in this debate, but its themes are at the heart of his fight. They are far from being resolved.

Note: This article was amended online on 22nd October 2015 in order to rephrase the description of the legal case in 1979 involving Amway and to rephrase the definition of a pyramid scheme.