How to set up a rule to award both referral customers and their referee?

This cannot be done via a single Earning rule. You will need two separate rules: one for the customer and another for their referee.

To create the rule for the referee:

Create a new Earning Rule of the Behaviour type in Reward Points -> Earning Rule;
If you want to award the referred customer for placing an order, choose the Customer places order event;
Go to the Conditions tab and add a new condition. From the drop-down list, under the Customer section, select the Is Referee condition and set it to Yes;
In the Actions section, set the number of points to be earned, save, and activate the rule.

To create the rule for the referrer:

Create a new Earning Rule of the Behaviour type in Reward Points -> Earning Rule, and go to the Conditions and Actions tab;
If you want to award the customer when their referees register, select the Referred customer signs up in-store event;
If you want to award the customer when their referees place an order, select the Order from referred customer event;
To award the customer for a specific number of orders made by the referee or impose other referral-related conditions, use the Referred Customer conditions subsection. For example, if you want to award points only for the referee's first order, use the Referred: Number of Orders condition;
Save and activate the rule.