California Penal Code Sec. 327 for chain marketing schemes. It reads as Follows:~~Every person who contrives prepares sets up proposes or operates any endless chain is guilty of a public offense and is punishable by imprisonment in the county jail not exceeding one year or in state prison for 16 months two or three years. As used in this section an "endless chain" means any scheme for the disposal or distribution of property whereby a participant pays a valuable consideration for the chance to receive compensation for introducing one or more additional persons into participation in the scheme or for the chance to receive compensation when a person introduced by the participant introduces a new participant. Compensation as used in this section does not mean or include payment based upon sales made to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme.~