This is relevant to the argument that Paypal is not merely responding to financial risks, but using its platform to impose its worldview. Guns are highly regulated in the US. Someone violating those regulations in the context on an online business is usually guilty of a felony, and has a high probability of being prosecuted. To my knowledge, guns don't have a high rate of chargebacks, as they involve a papertrail with an in-person pickup requiring government-issued ID and a background check.

At a gun show, two individuals could use PayPal to conduct a sale (if it was allowed on their platform), without any background check or government-issued ID.

They could, or they could list guns for sale on a classifieds site like Armslist and meet in private. People could use Paypal for such a transaction regardless of the terms of use, though trying to use the dispute resolution might result in both parties losing their accounts.

In any case, it's not a meaningful financial risk for Paypal. It might be a risk of bad press, but "criminal pays for gun with Paypal and uses it to commit a murder" probably isn't actually going to result in many people not using Paypal.

Ammunition sales don't usually have those requirements. In most states you can buy it online just as easily as a case of beer.

But yes, you are correct.