Supreme Court overturns law that barred Ted Cruz from fully recouping a personal loan he made to his campaign

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The U.S. Supreme Court struck down a federal law Monday that capped the number of campaign dollars political candidates could use to repay themselves for money they personally loaned their campaigns, handing a victory to U.S. Sen. Ted Cruz, who challenged the restriction.

The nation’s high court said in a 6-3 ruling that the 2002 law — which puts a cap of $250,000 raised after an election to pay back loans that candidates gave their own campaigns before election day — violated the First Amendment, with the majority opinion saying it “burdens core political speech without proper justification.” The court’s three liberal justices dissented.

Chief Justice John Roberts said in the court majority’s opinion that disallowing candidates from being able to fully recoup their funds past the cap could lead to less campaign messaging.

“That risk in turn may deter some candidates from loaning money to their campaigns when they otherwise would, reducing the amount of political speech,” Roberts wrote.

When Cruz was first fighting for his spot in the U.S. Senate, he was up against then-Lt. Gov. David Dewhurst, a wealthy, better-known opponent. So Cruz loaned his 2012 campaign over $1 million to close the gap.

Because of the 2002 federal law struck down Monday, he could never recoup $545,000 of that loan, leading him to explore options to overturn the limit.

During his 2018 campaign, Cruz loaned himself $260,000 one day before winning reelection, intentionally going $10,000 above the legal limit for repayment to have grounds to sue the Federal Election Commission and argue against the law.

Cruz’s team praised the court’s decision Monday, saying it would allow less wealthy candidates to remain competitive.

“The 6-3 decision today at the Supreme Court is a resounding victory for the First Amendment,” a Cruz spokesperson said in a statement. “Sen. Cruz is gratified that the Supreme Court ruled that the existing law imposed an unconstitutional restriction on free speech that unfairly benefited incumbent politicians and the super wealthy. This landmark decision will help invigorate our democratic process by making it easier for challengers to take on and defeat career politicians.”

Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor disagreed with the conservative majority’s opinion to strike down the limit.

Kagan wrote in her dissent that when political candidates are recouping money for a personal loan they made to their campaign, the dynamics of contributions change because the money is going straight to the politicians’ pockets, unlike traditional campaign dollars. She alleged that striking down the rule allows for the lawmakers to get paid directly and, in exchange, they can offer political favors.

“The politician is happy; the donors are happy. The only loser is the public,” Kagan wrote about the new arrangement. “It inevitably suffers from government corruption.”

The decision lines up with a long history of conservatives saying that campaign contributions amount to political speech and therefore shouldn’t be restricted.

Campaign Legal Center, a watchdog group, opposed Cruz’s challenge in an amicus brief and lamented the Supreme Court’s decision.

“It’s a disappointing but really unsurprising result from a court majority that has shown extreme hostility in the past decade-plus to reasonable limits on money in politics,” said Megan McAllen, CLC’s director for campaign finance litigation. “It takes no political genius to see the heightened risk of corruption in this context.”

McAllen said it creates an “obvious risk that wealthy donors will try to extract political favors” from political candidates.

She referenced a study that the FEC shared in a motion filed in July. Two finance professors at universities in France and Switzerland studied U.S. congressional campaigns from 1983 to 2018 and found officeholders in debt are more likely to change their votes to benefit PACs making post-election campaign contributions. They also noted that nearly half of all political campaigns rely on debt in some form.

“We hope that the ultimate fallout from the decision will be relatively limited, but it does reveal a court that is really out of step with reality,” McAllen said, also warning that other limits on campaign finance could be in jeopardy. “The overwhelming opinion of Americans is that this is a reasonable limit on campaign finance, and money and politics are integral to a functioning democracy.”

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