They take the money and bet on not enough people trying to sue and the terms being ironclad enough if they do that they get away with it in general even if they have to pay out a few times.
And they're not subject to banking regulations in the US. If they were a bank they wouldn't be able to pull this sort of BS.
I may or may not let you have it back depending on my whims.
Since you “gave” me the money, then I can do whatever I want with it.
Oh and I can take whatever money out of your bank account it want. Because I want it
I'm also surprised an activist hasn't attached a TOS to sending payments such as "By accepting my money you agree to pay me $1 Million dollars for any time I spend more that 5 minutes with customer service without my dispute being settled."
I seem to remember a case where someone altered the fine print agreement on a credit card application and the credit card company lost the case with the consumer, but I forget the details.
I can go ahead and write a ToS or even a contract that says "if you don't give me a blue M&M on Saturday 29 October 2022, you owe me $1M". I can get a client to sign it, perhaps it's part of my conditions as a freelancer.
I can't realistically see any court enforcing that.
As far as I can tell PayPal can only get away with this nonsense because they hold your money anyway. It's exactly the sort of reason people are fighting against cashless/custodial financial systems.