It states you can't trade 'securities', and a security wikipedia says is a 'negotiable financial instrument representing financial value'. The act of selling it for fiat currency instantly makes it a security I guess.
IANAL but will ask a lawyer to review the clause in the TOS:
"You also agree not to use your PayPal account to sell goods with delivery dates delayed more than 20 days from the date of payment, or to sell securities, business opportunities, franchises or multi-level marketing or goods with delivery delayed more than 20 days from the date of payment. You agree not to impersonate a PayPal User or a PayPal representative, or to request that a PayPal customer provide you with their password or other information to access their account."
As I read this, the prohibition is on selling securities with delivery delayed more than 20 days from the date of payment, not a prohibition on securities in general.
I can fund an E*Trade account with PayPal
I can buy gold and silver on ebay all day long with PayPal