Everyone knows the name PayPal. It’s a global entity that has almost become a household name. So, with that in mind, you’d assume that it does everything you ask of it with no problems. If you think that, you’d be incorrect.
PayPal had 434 million active users in December 2024, so we’re talking about a platform that is chosen by many. Yet, high-risk businesses struggle to use its payment processing prowess due to harsh restrictions and bans. In some cases, accounts are locked with payments unable to be accessed. That’s not what you want as a business owner.
The reason for this is that PayPal doesn’t accept high-risk transactions as part of its terms of services. When you consider the large number of industries that fall into the ‘high-risk’ category, that’s a lot of businesses struggling to find an alternative. But don’t worry; If you’re exploring high-risk merchant account solutions, PayCompass is the ideal PayPal alternative.
In this guide, we’ll explore exactly why that is the case by opening your mind to the huge number of PayPal restricted businesses.
TL;DR
- PayPal imposes strict regulations on high-risk businesses, either preventing them using the platform entirely, or making it extremely difficult to process payments.
- Businesses offering financial services face strict PayPal restrictions, particularly businesses involved in loans, investments, or money transfers.
- PayPal restricts transactions from the adult content and services industry due to concerns about age verification and illegal distribution.
- Gambling and gaming businesses are also heavily restricted due to their robust regulatory landscape.
- PayPal also places strict restrictions on businesses dealing with high-risk products, such as CBD, pharmaceutical, or weapons. This is due to worries about legalities and fraud.
- PayCompass is a solid alternative to PayPal, offering flexible high-risk merchant accounts, designed to overcome common challenges.
Understanding PayPal's Restricted Business Policy
Before we talk about the number of PayPal restricted businesses, let’s first look at the reason why. This is down to PayPal’s acceptable use policy and its general terms and conditions.
This policy gives details on the main business types or activities that PayPal either completely prohibits or restricts within its platform. The aim is to reduce risks that are traditionally associated with high-risk industries, including potential fraud and legal issues and regulatory scrutiny.
If your business falls under this category, you may face extra steps in the approval process, low transaction limits, regular extra checks on your transactions, or even a complete ban from the platform. However, by learning about high-risk payment processing challenges, you can identify alternative solutions and move forward.
The table below gives some useful information on risk levels and standard requirements.
Risk Level | Typical Requirements | Examples |
Low | Standard verification | Retail, Services |
Medium | Additional documentation | Dropshipping, Travel |
High | Extensive review, Possible restrictions | Adult content, Gambling |
Financial Services Restrictions
The financial services industry covers a wide range of different businesses, yet it is also deemed to be high-risk. As a result, these businesses face high levels of scrutiny from PayPal in general, due to its regulatory complexities and financial risk. This category covers things like payday loan providers and cryptocurrency exchanges. While some businesses aren’t completely banned under the PayPal acceptable use policy, they do face very strict restrictions that affect their payment processing needs.
1. Cryptocurrency Exchanges
Almost everyone knows that cryptocurrency is inherently volatile, and this is one of the main reasons why PayPal imposes restrictions upon the industry. Cryptocurrency exchanges facilitate buying, selling, and trading of crypto, and PayPal itself is extremely cautious due to not only the volatility but also the many regulatory uncertainties connected to digital currencies. There is also a concern about market manipulation and money laundering.
Of course, this isn’t the only problem that cryptocurrency businesses face. Additionally they must have extremely robust security measures in place to protect customers from hacks and loss of funds. Add to that the fact that regulations vary widely across jurisdictions and you can understand the difficulties.
When placed on the PayPal restricted businesses list, it’s important to find alternative options. PayCompass not only accepts cryptocurrency businesses but our merchant accounts are designed with these specific challenges in mind.
2. Forex Trading Platforms
Forex trading is included on the PayPal restricted businesses list, causing payment processing challenges
Forex trading platforms are also extremely commonplace these days, and these are platforms that allow users to trade currencies. However, PayPal is also cautious here due to the high risk of large-scale financial loss. Additionally, PayPal has concerns about the volatility of forex markets and the possibility of fraud.
We can also mention strict financial regulations here too, and platforms must ensure they have proper licensing in place for the jurisdictions they’re operating in and through.
3. Payday Loan Providers
Another financial services sector that struggles with PayPal’s restrictions is payday loan providers. These are companies that offer short-term, high-interest loans to people who need to access funds quickly. The biggest issue here is the high chance of payment defaults and potential for fraud. Additionally, these types of businesses are often criticized for “predatory” lending practices, which is a red flag for PayPal.
Ultimately, the platform prefers to protect customers from products that could turn out to be harmful to them over the long-term, therefore restricting and even prohibiting such payments on its platform.
4. Debt Collection Agencies
As you might imagine, debt collection agencies are subject to a number of regulations that they must comply with. One is the Fair Debt Collection Practices Act, or FDCPA. To break it down, a debt collection agency chases payments from individuals on behalf of their creditors, and due to the extremely sensitive nature of what they do, there are many potential legal issues to consider.
Because of this, debt collection agencies form part of PayPal’s prohibited businesses list due to concerns about disputes and harassment claims.
5. Investment and Securities Brokers
The final sector of the financial services industry that often faces restrictions from PayPal includes investment and securities brokers. These allow the buying and selling of financial securities and PayPal often restricts them due to regulatory challenges.
Within that, there is also a high potential for financial misconduct, which PayPal flags due to concerns about insider trading and market manipulation.
Adult Content and Services Limitations
It might not come as a shock to realize that PayPal often restricts or prohibits payment processing on their platform for adult content and services. In many cases, businesses find themselves on the PayPal prohibited businesses list, adding additional layers of complexity to their operations.
Many of these types of businesses run a continuity subscription merchants model, and that’s something which PayCompass can help you with. Our merchant accounts are designed with these challenges in mind, allowing us to give you the services you need to run your business, whether it’s an adult entertainment website or another part of the industry.
6. Adult Entertainment Websites
We just mentioned adult entertainment websites and these make up a large portion of the adult content industry. These websites provide adult content to subscribers, and face very strict restrictions from PayPal. This is down to the sensitive nature of what they provide, along with legal concerns about verifying age, as well as distribution.
7. Escort Services
Another part of the adult content industry that often faces PayPal issues is escort services. In many cases, these are prohibited entirely. To break it down, escort services provide companionship and the potential for adult activity by pairing up escorts with clients. This type of business is heavily restricted by PayPal due to the gray area it sits in legally, and a desire not to be associated with activities that could be deemed illegal.
8. Adult Product Retailers
Retailers that sell adult sex toys, items, and lingerie also face restrictions. These are different to other ecommerce businesses due to what they sell and the difficulties in regional rules and regulations. In this case, adult retailers have many challenges around customer privacy along with safety testing of their goods.
From PayPal’s point of view, the platform has concerns about customs issues along with the different legal rules from region to region.
9. Massage Parlors
Another high-risk business that falls into the PayPal acceptable use policy is massage parlors. In this case, payment processing is prohibited due to PayPal’s concerns about the potential for illegal activity. While many massage parlors obviously do not engage in such activities, the high risk involved causes PayPal to steer clear of offering their services in these cases.
10. Dating Websites with Adult Content
Dating websites in general raise suspicions with many payment platforms, PayPal included, but dating websites with adult content or those which cater specifically toward adult-orientated connections face heavy restrictions. Again, this is due to the sensitivity of the services offered, along with increased risk. Another concern is age verification, and these types of businesses must have extremely robust age verification systems in place to prevent fraud and ensure safety.
Due to the difficulties in moderating content created by users, PayPal places these businesses on their restricted list.
Gambling and Gaming Constraints
Another industry that falls into PayPal’s restricted businesses is gambling and gaming. In this case, PayPal notices the complex legal issues often associated with this industry, along with the potential for addiction. This goes further due to the difficulties associated with proving age.
Of course, PayCompass has an answer to these issues. Our accounts have a rapid approval process, along with robust fraud protection and easy payment integration. We also ensure smooth transactions across both bricks-and-mortar and online casinos. The list goes on, as we can also talk about our chargeback prevention, multi-currency support, and our virtual card issuing services.
All of this makes running a gambling or gaming business that much easier by choosing a high-risk merchant service provider that understands your unique challenges.
Before we talk about individual businesses within this category, the list below gives a broad overview of common restrictions.
Gambling Type | Legal Status | Common Restrictions |
Online Casinos | Varies by jurisdiction | Age verification, Geoblocking |
Sports Betting | Increasingly legalized | Licensing, Responsible gaming measures |
Fantasy Sports | Generally legal, some restrictions | State-by-state regulations |
Lotteries | Usually state-controlled | Limited to government-run operations |
Poker | Mixed legality | Player pool segregation, Strict monitoring |
11. Online Casinos
General interest in online casinos has exploded over the last few years, particularly during and since the COVID-19 pandemic. These sites include games such as roulette, slots, and blackjack, with the chance to win money. However, they face strict restrictions by PayPal due to their complicated regulatory landscape.
Online gambling sites are extremely popular, but that doesn’t mean they don’t face challenges. In this case, it’s because they’re heavily restricted by Stripe. This is down to the fact that such sites have to comply with very strict licensing requirements and these often vary a lot between regions.
There is also a high risk of money laundering and fraud in these cases, requiring robust and sophisticated fraud detection systems, along with the need to verify age.
12. Sports Betting Platforms
We can also talk about sports betting platforms, which have also become extremely popular. In this case, PayPal identifies the different legal statues across various regions, along with concerns about potential match-fixing. Of course, there is also a need to verify age, as with all gambling and gaming businesses. All of this makes it necessary to identify sports betting payment solutions that don’t interfere with daily practices.
PayCompass’ merchant accounts are designed to help ensure smooth payment processing during high-stakes, busy sporting events, and our fraud prevention helps to overcome any extra concerns.
13. Fantasy Sports Leagues
Fantasy sports leagues allow customers to create their own virtual teams and use them to compete in competitions globally. The good news is that this sector is less restricted than traditional gambling, such as online casinos and betting, but they are still identified as high-risk by PayPal. This is also because PayPal debates whether or not fantasy sports leagues are actually gambling or not, and so this niche sits in a gray area that is constantly changing.
14. Lottery Services
Lottery services also fall into PayPal’s acceptable use policy and, as a result, they face restrictions. The main reason is because of legal problems and concerns about illegal operations. As with other businesses that have this same concern, PayPal is very clear about distancing itself from even the tiniest risk of illegal practices by its customers.
15. Online Poker Rooms
Similar to online casinos, online poker rooms are also popular. These are virtual spaces that allow players to compete for cash. In this case PayPal has concerns around ensuring fair play and preventing any potential for money laundering. While platforms often utilize high-tech anti-collusion algorithms to spot any cheating, PayPal still deems these businesses too risky to include in its regular payment processing services.
High-Risk Products and Services Barriers
We could call this particular section a ‘miscellaneous’ one, but there are several businesses that sell products and services that PayPal simply classes as too risky. In many cases, this is because of health concerns, legal problems, or the high risk of misuse.
Let’s explore these in more detail.
16. Firearms and Weapons Dealers
Any businesses that deal in firearms or weapons are included in the PayPal prohibited businesses section. These businesses cannot use PayPal for their payment processing at all, and therefore must look for alternatives.
The main reason is quite obvious in many ways – PayPal has deep concerns about the potential for weapons being sold illegally and liability issues.
17. Tobacco and E-cigarette Retailers
Another heavily restricted industry includes tobacco and vape products. These are also extremely popular, which causes many challenges for businesses within these industries.
In this situation, PayPal restricts its services connected to harmful products in order to help navigate any potential legal issues. However, PayCompass helps you overcome these issues with the unique features of our merchant accounts. In this case, our accounts help you ensure compliance with strict regulations and manage high-value transactions. Of course, you don’t have to worry about restrictions and account locks either when trading vape products or tobacco in general.
18. Pharmaceutical Sales
It’s probably not surprising that PayPal places restrictions on pharmaceutical sales, and this also includes non-prescription medications in particular. In this case, PayPal has deep concerns about the possibility of counterfeit products and their effects on the general public, as well as overall regulatory compliance.
19. Nutritional Supplements
Closely linked to pharmaceutical products in general, PayPal also restricts nutritional supplements, causing many businesses to seek a dedicated account, such as PayCompass’ nutraceutical merchant account. The main concern here is the risk of false advertising creating undue expectations on the customer’s side, as well as potentially harmful products being sold. However, our merchant accounts help you overcome these issues with chargeback protection, fast approval, and our multi-currency capabilities.
20. Timeshare Reselling
Finally, we timeshare reselling is also included in this ‘miscellaneous’ section. In this case, businesses help people sell their timeshare properties, but this industry is restricted for several reasons. The main one is that PayPal has concerns about the risk of fraud, as well as the industry’s general reputation for high-pressure sales tactics. Of course, this type of company also often faces chargebacks, along with high-value transactions. All of this creates a PayPal restricted picture.
Legal and Regulatory Sensitive Business Challenges
Our final section covers businesses that face very robust legal and regulatory challenges. Of course, by the description alone, you’ll understand that PayPal prohibits many of these businesses and heavily restricts the others.
21. Cannabis and CBD Products
The list of PayPal restricted businesses includes CBD businesses selling marijuana and hemp-derived products.
Businesses selling both marijuana and hemp-derived products face very strict limitations from PayPal. This is because their legality varies hugely across different regions and this influences PayPal’s stance. Many of these businesses need to look for an alternative CBD payment processor to take away uncertainty regarding whether a payment will be processed, restricted, or blocked entirely. Thankfully, PayCompass does accept these businesses and our chargeback and fraud prevention help to ensure a smooth process without any worries in-between, as we keep up with the compliance and regulations that are ever-changing in this industry.
22. Alcohol Delivery Services
While not entirely prohibited, alcohol delivery services are restricted on PayPal due to age verification concerns. These businesses deliver alcoholic beverages from a store or warehouse directly to the customer, and often have to implement real-time ID verification systems to comply with regulations. However, PayPal worries about the potential for underage alcohol sales, which influences their decision.
23. Political Fundraising
PayPal prefers to stay neutral in all political matters, which is the main reason why political fundraising payments face high restrictions on the platform. In this case, organizations collect donations for specific causes or a political campaign itself, and must comply with many regulations regarding financial disclosure. PayPal prefers to steer clear of these situations because of the risk of foreign interference, along with potential election law violations.
24. Non-profit Organizations
It might seem strange that PayPal restricts non-profit organization payments. While not prohibited, they’re certainly restricted and carefully scrutinized, leading to the risk of a payment being held or even frozen. The main concern here is the potential for financial mismanagement and fraud.
25. Multi-level Marketing Companies
Finally, we have multi-level marketing companies, or MLM for short. These companies use complicated networks of distributors to sell their products. While most companies are entirely above-board, PayPal restricts them due to the potential for illegal pyramid schemes and generally deceptive practices.
Why PayCompass is the Best Alternative to PayPal
From this guide, it’s clear that the list of PayPal restricted businesses is long and includes many of the most popular industries around. As a result, there are many business owners facing uncertainty over payment processing every single day, or looking for an alternative that doesn’t cause a headache every time a transaction appears.
Call us biased, but we believe that PayCompass is the ideal alternative to PayPal for many reasons, especially for high-risk businesses.
We’ll tell you why.
Our tailored payment processing solutions are designed for businesses exactly like yours. We know the challenges you go through and we want to ease those waters by taking away the barriers to your business operations and growth. PayPal restricts and prohibits many businesses, but we simply don’t. Whereas PayPal can often suspend accounts out of the blue or hold payments for an unspecified time, you don’t have to worry about that with us.
We’ve created our accounts to solve the problems that cause your business to have its high-risk label. From chargeback prevention to real-time monitoring, fraud detection to fast approval, we’ve got you covered. We also accept multi-currency transactions in over 170 countries, allowing you to accept international payments with ease.
Put simply, your revenue will be safe, your stress levels will return to normal, and you will be free to focus on building and growing your brand.
Final Thoughts
Throughout this guide, we’ve explored the large number of industries and businesses affected by PayPal’s acceptable use policy, therefore causing them to be restricted or even prohibited on the platform. By reading this far, it’s likely that your business is on that list, and you’re no doubt aware of the uncertainty and challenges that a high-risk label causes. However, it’s equally important to remember that navigating these challenges may be tough, but it’s not impossible.
From regulatory concerns to fraud risk, worries over underage purchases to illegal practices, PayPal has a range of reasons why they choose to restrict certain transactions. While it makes sense, it doesn’t help you to run your business.
Yet, while PayPal’s policies certainly create roadblocks, there is always a detour, and in that case, it’s PayCompass. We pride ourselves on being a partner for high-risk businesses just like yours. We offer tailored payment processing options that overcome the hurdles that cause issues in the first place.
So, if you’re ready to ease the uncertainty and look toward a clearer future, contact us today and let’s work together to overcome the challenges that have plagued your business life so far.
