It's in their Terms of Service
2.8 Liability for Violations of the Acceptable Use Policy. If you engage in the following behavior, PayPal may fine you, as explained below. ...
Using the PayPal service to receive payments for wagers, gambling debts or gambling winnings, regardless of the location or type of gambling activity.
Doesn't say exactly how much a "fine" would be, but I'd be very cautious about this.
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