11 September 2022 |

The CBD MLM fraud

By Kaitlin Domangue

The year is 2016.

I am going through a pretty traumatic health event and just quit my job to focus on my health. I was 18 years old and apparently, very naive.

I saw a friend post about being able to pay for her groceries with this work-from-home, multi-level marketing company (MLM) and from there: it was all over.  

I’ll save you the details of how I lost hundreds of dollars, interacted with some of the most conniving, backstabbing, and narcissistic women (and a few men) I’ve ever encountered, and ultimately: lost a very strong friendship through my two years of multi-level marketing. 

Because that’s a whole other story – and maybe a book of its own 🙂 

But what I will focus on is how multi-level marketing companies are a fraud. Every one of them. 

AND I will focus specifically on CBD multi-level marketing companies – because multi-level marketing schemes are the last thing this industry needs. 

And eventually, this multi-level marketing model might translate to cannabis upon federal legalization. We CAN’T let that happen.

Working as a distributor for a multi-level marketing company did bring me ONE thing: the innate desire to work from home and control my own schedule – which I’m so fortunate to have been able to do since 2019.

But I didn’t do it with a multi-level marketing company and I’m going to tell you exactly why. 

PS – if you’re involved with an MLM, my goal is not to offend – but the numbers and hundreds of verifiable experiences don’t lie.

The dirt on multi-level marketing in cannabis 

First – what is a multi-level marketing company? Here’s the definition:

“The practice of selling goods or services on behalf of a company in a system whereby participants receive commission on their sales as well as the sales of any participants they recruit.”

Companies like Mary Kay, ItWorks, Herbalife, and Amway are all multi-level marketing companies. Distributors use social media and other techniques to recruit people to join their “team” and sell products, too. Products can be makeup, vitamins – even life insurance.

There’s usually a fee to join and distributors typically either have to sell a certain amount of product to receive commission or they have to purchase enough products to receive that payout. 

On social media, these distributors promise you an amazing, fulfilling life with plenty of cash coming your way. And they make it all sound so simple. It’s a business in a box, work your own hours. Make a ton of money. Live the life you want. 

In reality, that’s not true. 

Let’s talk about HempWorx – one of the most well-known CBD multi-level marketing companies around. HempWorx is under the “My Daily Choice” parent company which also houses other affiliate brands. 

My Daily Choice’s income disclosure statement for January 1st, 2017 to July 1st, 2018 paints a grim picture of life as a CBD distributor: 

  • 57% of distributors were at the “Builder” level during this time – this is level 1. The average Builder makes $122.64 per year – yes, per year. 
  • Only 3 distributors in this income statement are at the top rank of Super Affiliate, compared to 43,147 Builders. Super Affiliates make an average of $780,382.44 per year.
  • Almost 30,000 people held the title of Executive during this time – the third level. Executives make an average of $1,086.24 per year

According to this income disclosure statement, you must ascend approximately seven levels before you have a solid chance of making a good living every single year. Most people make MAYBE $100 every year.

The seventh level, called 50K, makes an average of $62,273.40 per year. Just 85 people – out of over 100,000 total distributors – held that title during this time.

Facebook and Instagram feeds tell a completely different story. Distributors say if you join HempWorx, you’ll make more money than you ever have in your life. And quickly. And all from home and on your own time.

The income disclosure statements aren’t broken down like I did above, rather they’re used to highlight the extreme minority within the company – indicating that one day you can ALSO make $700,000 per year selling CBD from home. Just sign up today! 

Below is part of a real post, posted by a HempWorx distributor, that was shared to a Reddit community.
This person is admitting that she only shares the good. The new cars and houses and vacations. She doesn’t share that her team volume is going down and thus, her paychecks are going down, too. 

So, why am I sharing all of this with you?

Because multi-level marketing companies are predatory and I will protect the cannabis industry from them with the ferocity of a mother bear protecting its newborn cub. 

A non-CBD multi-level marketing company, Herbalife, preyed on Latino immigrants with little to no income. You can watch more in the documentary, Betting On Zero. 

Upon federal legalization, the cannabis industry is ripe for multi-level marketing companies to exist. This is for a few reasons:

  1. Cannabis is a health-centric product, perfect for multi-level marketing companies 
  2. It can be significantly marked up to make a profit
  3. There are billions of dollars floating around the cannabis industry
  4. We’re an industry committed to helping disadvantaged people thrive and be successful – something MLMs also claim to do
  5. We are a new and vulnerable industry with not many established players yet

Multi-level marketing companies typically prey on women, especially women who stay-at-home with their children or as a spouse. For CBD companies, this is the perfect opportunity. 

Stressed out stay-at-home mom? Take some CBD, make some friends, AND make some money from home on your own time.

I become irate thinking about powerful, strong women who want to join the cannabis industry and are somehow roped into these CBD multi-level marketing companies. And in the future, federally legal cannabis MLMs. 

And listen – I was just an 18 year old kid. But highly-educated doctors, attorneys, corporate professionals also fall for the scam. It’s because of how the company is marketed.

As an industry just fighting for social acceptance, cannabis MLMs just seem like a target on our backs. There’s enough fraud in the industry as is – we don’t need any more. 

As legalization inches closer (or not) – be mindful of predatory models like MLMs popping up and taking advantage of people in this space. The numbers don’t lie and most people lose money from these companies. 

With that being said, most of the existing cannabis industry is quite protective of this space. Any inkling of bad behavior is called out and shamed. I anticipate that will continue as MLMs and other bad actors pop up.