A three-judge panel has struck down the federal cap on candidates using political contributions to repay personal loans they make to their campaigns, in a case that hands Texas Republican Sen. Ted Cruz a win and may have broader implications for campaign finance.
The Federal Election Commission had argued the cap was needed to prevent quid pro quo corruption. But the federal judges disagreed, saying the limit restricts free speech.
“A candidate’s loan to his campaign is an expenditure that may be used for expressive acts,” the court said, in an opinion written by DC Circuit Court of Appeals Judge Neomi Rao, who was appointed to preside over the trial court-level panel. She and DC District Court judges Amit Mehta and Timothy Kelly ruled unanimously.
“Such expressive acts are burdened when a candidate is inhibited from making a personal loan, or incurring one, out of concern that she will be left holding the bag on any unpaid campaign debt,” the ruling added.
The portion of the law that Cruz challenged capped at $250,000 the amount of money candidates could seek from donors to repay personal loans to their campaigns. In his 2018 campaign for the US Senate, Cruz loaned his campaign $260,000 — $10,000 over the limit.
In his lawsuit, Cruz argued that the law imposed “arbitrary restrictions on core political speech.”
Cruz spokesman Steve Guest called the decision “a resounding victory for the First Amendment and free speech,” in a statement issued Thursday evening. The commission rules “benefited incumbent politicians and the super wealthy and they made it harder for challengers to run,” he said. “The court rightly struck them down as unconstitutional.”
Campaign finance watchdogs, however, have supported the cap, arguing that allowing unlimited donations to help repay candidates’ personal loans opens the door to undue influence by special interests. That’s a particular concern, they argue, because much loan-repayment fundraising occurs after an election, so donors are helping someone they know will serve in Congress.
It’s not clear whether the Federal Election Commission, which often sharply divides along partisan lines, will appeal the ruling. FEC spokeswoman Judith Ingram said the commission does not comment on litigation.
Over the years, federal courts have chipped away at the 2002 law that governs how elections are funded. In 2008, for instance, the US Supreme Court struck down the so-called millionaire’s amendment that aimed to level the playing field when wealthy candidates financed their own campaigns. That provision had relaxed contribution limits for opponents of self-funded candidates in an attempt to close the funding gap.