Lessons Learned from the PayPal Debacle

PayPal is currently in an existential crisis.

The company recently issued an updated “Acceptable Use Policy” (AUP), which was set to go into effect on November 3 of this year.

Among other things, the AUP included a $2,500 fine, which was to be imposed on users of PayPal if said users transmitted speech that the digital financial service company deemed unacceptable.

The type of speech that would have triggered the policy included “the sending, posting, or publication of any messages, content, or materials” that “promote misinformation.”

Debits taken directly from users’ PayPal accounts would have been the means used to collect the hefty fines.

Having already suffered the loss of free expression at the hands of the reigning misinformation police currently patrolling our society’s virtual and real worlds, a whole lot of people reacted swiftly and forcefully.

A tsunami-sized backlash against the AUP ensued in the conventional media, social media and elsewhere. This forced PayPal to backtrack big time.

Up until now the multinational technology company had been the world’s preeminent online payment system, ranking 143rd in revenue on the 2022 Fortune 500 list.

Originally founded in 1998 by Max Levchin, Peter Thiel and Luke Nosek as a company called Confinity, it went through a merger in 2000 with X.com, an online financial services company co-founded in 1999 by Elon Musk.

Musk directed X.com to focus its resources on the online payment business. Musk was subsequently replaced by Thiel as CEO of X.com, which was renamed PayPal, and ultimately went public in 2002. The former wholly owned subsidiary of eBay became an independent company again in 2015.

Like way too many other large tech enterprises, PayPal’s management ultimately swerved into speech regulating territory, banning in 2018 radio host Alex Jones, along with Jones’s website.

Three years later PayPal announced a plan to collaborate with the Anti-Defamation League (ADL) and the League of United Latin American Citizens (LULAC), as well as other nonprofits, to scrutinize users’ transactions for purported investigative purposes relating to extremism groups. The results were intended to be shared with law enforcement and other entities.

ADL CEO Jonathan Greenblatt indicated that a better understanding of how extremist groups use PayPal could potentially “help disrupt those activities.”

In September of 2022, PayPal closed the accounts of a British social commentator and two related groups, the Free Speech Union and The Daily Sceptic website.

The accounts were apparently terminated because of alleged misinformation about the COVID-19 vaccine. A few days later, however, PayPal reversed its decision.

During the same month, the company threatened to withdraw its sponsorship of the Phoenix Suns, if the basketball team’s owner Robert Sarver failed to be removed from the franchise.

Sarver is presently under a one-year suspension from the Suns, following an internal investigation that found he allegedly used “hostile” words and slurs against women and minorities.

The company also recently banned Gays Against Groomers, a group composed of LGBT-identifying individuals. Simultaneously, PayPal’s subsidiary Venmo also blocked the organization.

Ian Miles Cheong, an independent journalist who reports on the promotion of transgenderism to minors, has also been banned.

After facing media scrutiny and a viral wave of criticism, including some chiding from its former president David Marcus and one of the company’s founders Musk, lo and behold, the company stretched credibility by claiming the change in policy had gone out to the public by mistake.

A PayPal spokesperson reportedly told the following to National Review:

“An AUP notice recently went out in error that included incorrect information. PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy. Our teams are working to correct our policy pages. We’re sorry for the confusion this has caused.”

— Marcus had used his Twitter account to slam the original AUP policy change.

“It’s hard for me to openly criticize a company I used to love and gave so much to. But PayPal’s new AUP goes against everything I believe in,” PayPal’s former CEO tweeted. “A private company now gets to decide to take your money if you say something they disagree with. Insanity.”

— Musk tweeted a single word reply, “Agreed.”

— Another Twitter user, Andrea Stroppa, had shared an article on the policy change and added, “Worrying. That’s why we need the X platform more than ever.”

Musk responded with an emoji, “💯,” meaning total agreement. Stroppa appeared to be referring to a new platform that Musk recently said he wanted to create.

Professionals in tech and media know quite well, when dealing with Terms of Service, these kinds of changes are reviewed and signed off on by skilled executives and attorneys before they are implemented.

— Intrepid reporter and social media influencer Jack Posobiec didn’t mince words when he posted, “#BankruptPaypal no one is buying their walkback. We know what their plan is. They’re just mad they got caught.”

— “Well, well… looks like PayPal spread misinformation about itself,” Christina Pushaw, campaign spokeswoman for Gov. Ron DeSantis, tweeted. “Maybe they should pay a $2,500 fine to all of us?”

Other furious users had simply closed their accounts and taken to Twitter to share their thoughts.

— Commentator and impactful influencer Candace Owens had tweeted, “Just moved all money I had in my PayPal account out of it. And I very must suggest you do the same. This is serious… #PayPal is dead.”

— Sen. Tim Scott, R – S.C., had posted his desire to investigate the matter.

“Allowing private companies to become thought police would be egregious and illegal overreach,” Sen. Scott tweeted. “My office will be looking into the validity of PayPal’s new policy and taking any necessary action to stop this type of corporate activism.”

It remains to be seen the extent to which PayPal has damaged itself with the attempted curb on freedom of expression and the unconvincing withdrawal.

In any event, the PayPal saga serves as an object lesson for corporations still wishing to dabble in viewpoint discrimination.

A big warning sign now hangs at the entrance to the internet, which reads,

CAUTION: Censor at your own risk.