OK to ask someone to be a paid member to be an Associate?

It might just be me (I have had a few drinks) but I've no idea what you're on about?

This is not legal advice.

The only real answer here is to consult with an attorney legally licensed in the jurisdiction of operation. Having said that, there is a level of law that would tend to support the notion that money should not be involved in a transaction where an affiliate would have to purchase a product or service in order to promote that product or service.

Is there a law? Perhaps, but again it depends on the jurisdiction and the venue.

If you look at most of the larger affiliate programs out there none of them charge a fee to be an affiliate. That might be an indication that would carry some weight but again there is no substitute for a good Attorney.

The danger is that you fall into pyramid scheme territory.

Person 1 is not really interested in the product, but he buys to get the income opportunity. He then sells to other people just like him, other income seekers.

These income seekers buy the product, but have no real interest in it, buying it is just their entrance fee into the scheme, and so on.

Eventually, most or all the sales are simply recruitment commission, as few, perhaps none, of the buyers are interested in the product. In other word, are just cover for recruitment commissions.

Sooner or later such schemes inevitably collapse, but if the authorities find you first, dealing with angry paid-up affiliates might be the least of your worries.

Thus can happen whether you intended it to, or not. Paying commissions on recruiting affiliates/distributors is often considered a red flag for this reason. And by making a product purchase a requirement for joining the affiliate program, you are making it really hard to distinguish between recruitment of distributors/affiliates, and genuine retail sales

It's only a pyramid if it's multi-level ... if you're charging a monthly fee to be a member of your program, as long as it's product driven (the fee is to make sure you're only dealing with serious reps who have some skin in the game), and you aren't building "downlines" - just a single level for referrals - you'll be fine.

However, I do think that this structure will attract the MLM crowd and might ultimately become nothing but people paying the fee in the hopes of getting other people to sign up and pay the fee. You'll probably get more of those with this structure than you will with a traditional affiliate model, and the down side of that is that it cheapens the image of your product. I would never buy a product like Herbalife, even if it was great, simply because their marketing tactics are so sneaky I wouldn't trust the company.

A Ponzi is an investment scheme, where earnings within a fund are based on the contributions of other investors and not the investments made. Named after Charles Ponzi, who was the first person to pull one off in a big way. This is like what Bernie Madoff was doing.

Although people often use the phrase to incorrectly describe MLM's, it's not the same thing as a product-driven operation that charges a membership or franchise fee. Many businesses operate this way - in fact, any business that has both a monthly fee and an affiliate program IS operating this way. If I am paying a monthly fee for the rights to sell a product, and I also join their affiliate program and get paid to refer people, that doesn't magically make the business offering the product a scam.