EFG Magazine

Mr. Cruz challenged a federal law that caps repayments of loans from candidates to their campaigns from postelection contributions.

Senator Ted Cruz challenged a law that places a $250,000 limit on the repayment of personal loans to campaigns using money from post-election donations.
Senator Ted Cruz challenged a law that places a $250,000 limit on the repayment of personal loans to campaigns using money from post-election donations. Credit... Tom Brenner for The New York Times

Adam Liptak

Jan. 19, 2022

WASHINGTON — The Supreme Court seemed ready on Wednesday to side with a challenge to a federal campaign finance law brought by Senator Ted Cruz, Republican of Texas, in what would be the latest in a series of decisions dismantling various aspects of campaign finance regulations on First Amendment grounds.

The law Mr. Cruz challenged places a $250,000 limit on the repayment of personal loans from candidates to campaigns using money from postelection donations. Seeking to test the constitutionality of the law, Mr. Cruz lent $260,000 to his 2018 re-election campaign.

A related regulation allows repayment of loans of more than $250,000 so long as campaigns use pre-election donations and repay the money within 20 days of the election. But the campaign did not repay Mr. Cruz by that deadline, so he stands to lose $10,000.

Malcolm L. Stewart, a lawyer for the federal government, said that Mr. Cruz’s financial injury was self-inflicted. Mr. Cruz’s campaign could have lawfully repaid him, he said, if it had done so within the 20 days specified in the regulation.

Several conservative justices seemed unpersuaded by the argument, saying that plaintiffs are permitted to test laws they believe are unconstitutional by acting against what could be said to be their self-interest.

Mr. Stewart said the law helps address potential corruption. “Because repayment of candidate loans increases the candidate’s personal wealth,” Mr. Stewart said, “the conduct the statute regulates implicates the same concerns that underlie limits on gifts to federal officials.”

Justice Amy Coney Barrett questioned that analysis. “Senator Cruz says that this doesn’t enrich him personally because he’s no better off than he was before,” she said. “It’s paying a loan, not lining his pockets.”

Justice Brett M. Kavanaugh added that contributions to federal political candidates are already restricted. “Why isn’t the $2,900 limit that applies sufficient to address the government’s anticorruption interest, especially given, as Justice Barrett says, it is a loan, not a gift?” he asked.

Justice Sonia Sotomayor asked why Congress drew the line at $250,000. Mr. Stewart responded that lawmakers had struck a balance, allowing candidates to use loans as seed money for their campaigns.

Mr. Stewart said the burdens imposed by law are minimal. “You can loan the campaign as much money as you want and you can get full repayment as long as the loan is repaid with pre-election funds,” he said.

But Justice Kavanaugh said that might be hard to do in the final days of a close election.

“You’re emptying the coffers,” he said. “It’s down to the wire. There are no pre-election funds left.”

“In that instance,” he said, “the candidate coming down to the last few days is quite a bit chilled from using his or her own resources above $250,000, because there’s no possibility of repayment under this statute, even in $2,900 chunks.”

Charles J. Cooper, a lawyer for Mr. Cruz and his campaign, said that the contribution limits were sufficient to address potential corruption and that the $250,000 cap added nothing to that effort.

“According to the government,” he said, “Congress effectively gives a corruption hall pass to the first 86 donors who max out after an election but abruptly closes the corruption window on donor No. 87.”

Justice Elena Kagan responded that the cumulative number matters, too.

“The candidate with $3,000 of debt is a lot less likely to start thinking about how he can sell his votes than the candidate with $500,000 of debt,” she said, adding: “The entire point of this law is that we start getting worried when people start repaying the candidate’s indebtedness, because that’s just another way of putting money in his pocket.”

Timing matters, too, Justice Sotomayor said. “We know that after an election that your contribution as a contributor is not being used to promote a candidate because the candidate has already won,” she said.

Mr. Cooper said contributors should be able to “exercise the First Amendment right to associate with the winner, and to hope that that will result in the kind of influence and access that support for a candidate begets.”

Mr. Cruz sued the Federal Election Commission before a special three-judge district court in Washington, arguing that the repayment cap violated the First Amendment.

Judge Neomi Rao, who ordinarily sits on the U.S. Court of Appeals for the District of Columbia Circuit, wrote for a unanimous panel that the cap amounted to an unconstitutional burden on candidates’ free speech rights.

“Protections for political speech extend to campaign financing because effective speech requires spending money,” Judge Rao wrote, adding that “the loan-repayment limit intrudes on fundamental rights of speech and association without serving a substantial government interest.”

The ruling in the case, Federal Election Commission v. Ted Cruz for Senate, No. 21-12, may also affect Mr. Cruz’s ability to recoup more than $500,000 that he lent to his 2012 campaign.