It is a pyramid scheme, illegal in most countries, and against PayPal's TOS. http://www.paypal.com/cgi-bin/webscr?cmd=p/gen/ua/use/index_frame-outside&ed=rich_quick "You may not use PayPal to send or receive payments for any form of multi-level marketing programs (including online payment randomizers), as well as matrix, pyramid and Ponzi schemes, "get rich quick" schemes, “Autosurf†programs, High Yield Investment Programs (HYIP), or other similar ventures." It is only a matter of time before AlertPay also cracks down on randomizers. AlertPay has a general disclaimer against "any products or services deemed illegal by international law" and "Violation of any law, statute, ordinance, contract or regulation, including, but not limited to, those governing financial services, consumer protection, unfair competition, anti-discrimination, or false advertising." In a Randomizer scheme you pay $3 to participate and a randomizer script gives a random participant $2.75 each time someone new joins the scheme. The website keeps the $.25 and you trust them to randomize each new sale and not keep it for themselves. They say its not a pyramid scheme because they have a nominal product like an ebook.
No it's still an illegal pyramid type scheme with the twist of randomizing payees instead of using a hierarchy. http://www.ftc.gov/speeches/other/dvimf16.shtm "Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company's incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company's distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public." "Some people confuse pyramid and Ponzi schemes with legitimate multilevel marketing. Multilevel marketing programs are known as MLM's,(4) and unlike pyramid or Ponzi schemes, MLM's have a real product to sell. More importantly, MLM's actually sell their product to members of the general public, without requiring these consumers to pay anything extra or to join the MLM system. MLM's may pay commissions to a long string of distributors, but these commission are paid for real retail sales, not for new recruits."
With randomizers and matrix`s if the owner of the site is wanting you to join and offering a product ie an ebook then it is not classed as a pyramid as you are getting a product for your money . This is classed as legal .I have run a randomizer for quite a while through paypal and never had an issue as i was offering ebooks to join so basically it was legal through paypal .
Doesn't matter if you are offering a product or service with Paypal, both randomizers and matrix programs are against their TOS. AlertPay does allow them as long as you have a premier or business pro account, but I believe even they will eventually term them against their TOS as well.