PayPal recently shut me down for selling throwing stars... their policy forbids use of PayPal for all weapons and knives, except "certain firearms."
A UK-based competitor snitched to PayPal that I was selling stars (so I hear).
Anyway, I got an order from someone with a bogus mailing address and a bogus email. Within 30 seconds of sending them an invoice, my account was frozen.
PP told me that I had to remove the questionable items from my site, per their Acceptable Use Policy.
I looked at the AUP, and pointed out to them (via email) that the policy says nothing about what I can or cannot sell; only what I can or cannot use PayPal for. I suggest that I add a disclaimer to the star listing. The PayPal rep agrees that this would satisfy the AUP.
After adding the disclaimer and submitting the requested e-paperwork, I get another email "requesting" that I remove the item in order to have access to my account.
I replied by saying that
1) I am required to do what I agreed to in the AUP contract, not what PayPal "requests" that I do.
2) PayPal already agreed, in writing, that a disclaimer would satisfy the AUP.
Within 30 mins, my account was opened.
In general, I think they should give people a warning and open up a dialogue before they freeze your cash, not after.