US Supreme Court Sides With Ted Cruz, Quashes $250K Cap On Post-Election Donations To Repay Loans

In a 6-3 decision, the Supreme Court ruled Monday that Sen. Ted Cruz (R-Texas) can now hit up donors to help pay himself back for the $555,000 he loaned to his campaigns in 2012 and 2018.

Cruz won the ability to recoup his loans with political donor money after the court ruled that a 2002 campaign finance law creates an unconstitutional burden on freedom of speech. That law prohibits candidates from raising up to $250,000 in post-election contributions to repay loans made during a federal political campaign.

The court’s decision could create a new way for political candidates to finance their campaigns through personal loans that would be paid back later by donors. That could also enable politicians to personally make money on their campaigns by charging interest on loans later repaid by donors. And it could also signal a further weakening of the already teetering edifice of campaign finance regulation.

But in the immediate term, the court’s decision will allow one candidate ― Cruz ― to raise money from rich donors and political action committees to repay the more than half-million dollars he loaned to his two Senate campaigns.

The case of Federal Election Commission v. Ted Cruz for Senate emerged in the final days of Cruz’s reelection campaign in 2018 against Democrat Beto O’Rourke. Cruz loaned his campaign $260,000, choosing this amount on purpose because it was $10,000 over the limit on post-election fundraising aimed at paying off personal loans. His intention in making the loan was to challenge this limit in court. And by winning he will not only get to recoup the $10,000 over the limit he loaned himself, but also another $545,000 he loaned his campaign in 2012 and hasn’t recouped.

Thanks to a Supreme Court ruling, Sen. Ted Cruz can now raise $555,000 to pay himself back for loans made to his campaigns. (Photo: Chip Somodevilla via Getty Images)

The $250,000 limit on post-election fundraising to repay loans was enacted as part of the Bipartisan Campaign Reform Act of 2002 ― more popularly known as McCain-Feingold after its lead Senate sponsors. The law allows candidates to pay off loans with money raised pre-election, but only if they do so within 20 days after the election.

The justification for these limitations is that post-election contributions to a candidate, particularly a winning candidate, to help them repay a loan present an increased potential for corruption or the appearance of corruption because “when a campaign uses a contribution to repay the candidate’s loan, every dollar given by the contributor ultimately goes into the candidate’s pocket,” the Justice Department argued in a brief to the court.

“A post-election contributor also usually will know whether the recipient of the contribution has prevailed in the election,” the DOJ brief continues. “The contributor therefore can know ― rather than merely hope ― that the recipient will be in a position to do him official favors.”

Justice Elena Kagan noted the risk of corruption in a dissent, joined by Justices Stephen Breyer and Sonia Sotomayor.

Kagan laid out a potential scenario: “And as they paid him, so he will pay them. In the coming months and years, they receive government benefits ― maybe favorable legislation, maybe prized appointments, maybe lucrative contracts. The politician is happy; the donors are happy. The only loser is the public. It inevitably suffers from government corruption.”

The long-term impact of the ruling is not known at this time. More candidates could move to fund their campaigns through loans that could be repaid by donors at a later date, but there is no immediate driving impulse for such a shift.

Cruz, however, will be able to raise $555,000 and put it in his own pocket immediately. For that, he can thank the six conservative justices ― three of whom he voted to confirm.

Picking a fight
Senate Minority Leader Mitch McConnell, R-Ky., called the 2002 law a “constitutional train wreck” from the outset and challenged the law immediately. But in a 2003 ruling that bears his name, he lost at the Supreme Court. He boasts now that the high court has been dismantling the law ever since.

The biggest blow came in 2010, with the Citizens United ruling. That opened the door to super PACs and unlimited corporate spending on campaign ads. The 5-4 court sided with a conservative group the FEC had blocked from promoting a film that accused Hillary Clinton of corruption.

The loan-repayment cap is only the latest provision in the crosshairs.

“The limit chills core political speech, especially speech by unknown challengers who need to spend more to be heard. And the loan-repayment limit does not serve any legitimate government interest,” McConnell argued in a friend of the court filing supporting Cruz.

Watchdog groups don’t much like the idea of wealthy candidates buying a Senate seat.

Nor do voters. Campaign history is filled with defeated candidates who dug deep into their fortunes.

The Biden administration sought to disqualify Cruz from contesting the cap by pointing out that he only left $10,000 on the table to pick a fight. Justices across the spectrum were unpersuaded, noting a long history of plaintiffs purposely violating a law in order to challenge it.

The Justice Department also noted that Cruz didn’t claim, or prove, that he repaid the first $250,000 using funds raised after Election Day. In fact, earlier in the litigation campaign aides said none of it was repaid with post-election donations, and that they didn’t bother to trace whether donations that came in before or after Election Day were used.

Given that, the government argued, the senator could even now collect another $10,000 from his campaign account, without violating the law.