But there is no regulation on banks that would affect this policy. Actual banks that offer merchant accounts do the exact same thing. They can and do freeze you

But there is no regulation on banks that would affect this policy. Actual banks that offer merchant accounts do the exact same thing. They can and do freeze your merchant account freely, leaving you with no access to any undisbursed funds. I've been through this myself. I had a merchant account about 8 years ago, underwritten by First National Bank of Omaha (the largest private bank in the United States). I got a couple large, unexpected chargebacks all at once from a single scammer that used multiple stolen cards. FNBO decided to create a reserve on my account for several days while they reviewed my account, then decided to terminate it due to the chargebacks. They held several thousand dollars of my money for exactly 180 days before returning it to me. That's money I needed to pay vendors and pay my bills - and it was perfectly legal for this regulated bank to hold it.