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Simple English definitions for legal terms
gifting circle
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A quick definition of gifting circle:
A gifting circle, also known as a gifting club, is a type of pyramid scheme where people give money to other members with the hope that they will receive more money in return from future members. Some gifting clubs only allow women to join and leaders may try to avoid paying taxes by calling the money a "gift". However, many states consider gifting clubs to be illegal and similar to a lottery or Ponzi scheme.
A more thorough explanation:
A gifting circle is a type of pyramid scheme or Ponzi scheme where members make "gifts" of money to other members with the expectation that future recruits will make "gifts" to the present members.
Many gifting circles limit membership to women and leaders often try to evade income-tax laws by claiming that the money paid in by a recruit is a tax-free "gift" to a club member. They also warn new recruits not to expect "gifts" in the future.
Some states consider gifting circles as illegal pyramid schemes while others hold that they are illegal lotteries.
For example, if a person joins a gifting circle and pays $1000 to a member, they are promised that they will receive $8000 in return once they recruit eight new members. However, this is not sustainable as the number of new members required to keep the scheme going increases exponentially.