The Direct Selling Association scored a meaningful win in Washington this week, and it is one that every distributor and company in the network marketing space should pay attention to.

The House Appropriations Financial Services and General Government Subcommittee, led by Chairman Dave Joyce, included Section 508 in its appropriations markup for the full year 2026. That provision requires the FTC to demonstrate a clear need for any new rules it wants to finalize, and specifically requires the agency to account for existing self-regulatory frameworks already in place across affected industries before moving forward.

In plain language, Congress just told the FTC it cannot push through sweeping new regulations targeting direct selling without first justifying them and showing that existing consumer protection measures are not already doing the job.

What the FTC Was Trying to Do

To understand why this matters, you need to go back to January 2025. In one of its final acts under Democratic leadership, the FTC unveiled three major regulatory proposals that would have significantly changed how MLM companies and their distributors can talk about income.

The package included a new Earnings Claim Rule specifically targeting the MLM industry, proposed expansions to the existing Business Opportunity Rule, and an Advance Notice of Proposed Rulemaking floating even broader requirements still under consideration. Under the proposed Earnings Claim Rule, MLM companies would be prohibited from making any income claims they could not substantiate in writing. That written substantiation would have to be maintained for three years and provided to any consumer or regulator who requested it. Anecdotal success stories and limited participant data would not qualify as acceptable substantiation. Companies would need comprehensive market analysis and earnings data across their entire distributor base to back up any income representation made anywhere in their field.

The broader package floated additional requirements that never made it to the formal proposal stage but signaled where the previous FTC leadership wanted to go. Those included mandatory waiting periods before new recruits could join or pay, forced publication of participant earnings data on company websites, bans on non-disparagement clauses in distributor agreements, and new standards around how companies could discuss benefits and compensation.

The civil penalty exposure for violations under a finalized rule would have been significant, and the compliance burden on companies large and small would have been substantial.

The Rule Was Already on Shaky Ground

The proposals were controversial from the moment they landed. The two Republican FTC commissioners at the time, Andrew Ferguson and Melissa Holyoak, both voted against the package and issued a joint dissent making clear they viewed the timing as a political move by outgoing Biden appointees.

Ferguson wrote that the time for the Biden-era FTC to propose new rules ended the morning after the presidential election, and that decisions about whether these rules were lawful and prudent belonged to the incoming Trump administration. Ferguson subsequently became FTC Chair under the Trump administration.

President Trump also signed an executive order on his first day in office directing all federal agencies to pause proposed rules and submit them for review before any could move forward. That order effectively froze the FTC earnings claim proposals pending further evaluation.

Section 508 in the House appropriations markup layers congressional pressure on top of that executive branch pause. The combined effect is a significant headwind against the proposed rules ever being finalized in their original form.

What the DSA Is Saying

DSA CEO Dave Grimaldi welcomed the subcommittee action and framed it in terms of the industry’s existing investment in self-regulation. The DSA has argued consistently that its member companies already operate within a robust compliance framework through the Direct Selling Self-Regulatory Council, which is housed at BBB National Programs and handles earnings claim complaints, income disclosure reviews, and distributor conduct issues across the industry.

The DSA’s position is that any FTC rulemaking should account for that infrastructure rather than layering on top of it as if nothing is already in place. Section 508 essentially codifies that argument at the congressional level, requiring the FTC to factor in existing self-regulatory frameworks before it can justify new rules.

What This Means for Distributors and Companies

The immediate practical effect is that the proposed FTC earnings claim rules are unlikely to move forward in the near term, if at all under the current administration. That is not a green light to make income claims without substantiation. The FTC’s existing authority to pursue deceptive earnings claims through enforcement actions remains fully intact. Making misleading income representations has been illegal under existing law for decades and that has not changed.

What has changed is the prospect of a new rule that would have dramatically expanded the FTC’s ability to seek civil penalties, imposed sweeping new recordkeeping requirements, and potentially required public disclosure of earnings data that companies would rather not publish.

For legitimate direct selling companies operating with clean compliance practices, the proposed rules were less of a direct threat and more of an operational burden. For companies with looser standards around how their field talks about income, the proposed rules would have created real exposure. The pause in rulemaking does not eliminate that exposure. It just means the enforcement environment remains the same rather than getting significantly stricter.

The Bigger Picture

This regulatory fight is not over. The FTC’s interest in earnings claims across the direct selling industry predates the January 2025 proposals and will outlast the current political cycle. The question of how to regulate income representations in a channel where independent distributors make claims that companies cannot fully control is a genuine policy problem that both sides of the aisle have tried to address in different ways.

The DSA’s argument that self-regulation is working deserves scrutiny alongside the FTC’s argument that it is not. The answer is probably somewhere in between, which is where most durable regulatory frameworks end up.

For now, the industry has a moment of breathing room. What companies and distributors do with that breathing room, in terms of cleaning up income claim practices and strengthening compliance culture, will do more to shape the long-term regulatory environment than any single appropriations provision.