Can a seller insist on payment through PayPal Friends & Family?

It's not uncommon for sellers to ask for that form of payment, or other similarly unsecure methods. There may be a number of reasons, including trying to avoid PayPal fees, or trying to protect themselves from fraudulent chargebacks by dishonest buyers. OR, they may be trying to prevent a legitimate chargeback when they are dishonest in their sale. 

We do not, at this time, have any rules against asking for F&F, but we do caution our buyers to try and avoid using it...or, at the very least, understand the risks involved when you do. There are legitimate, honest sellers that only take F&F. But the dishonest sellers are far more likely to demand these kinds of unsecure payment methods. These are the equivalent of handing over cash that you'll likely never see again if something goes wrong with the transaction.

Research the seller. Then evaluate how much risk you think is involved in that particular transaction and whether or not the deal is worth taking that risk. 

You can find our thoughts on the most common payment methods here:
https://support.morphmarket.com/article/53-safe-purchasing