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SCOTUS Rules in Favor of Sen. Cruz’s Challenge to Federal Campaign Loan Repayment Cap

By Benjamin Keane and Michael Pfeifer
June 2, 2022
  • Federal Government Affairs
  • General
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Last month, in a decision emanating from a lawsuit filed by Senator Ted Cruz (R-TX) following his 2018 U.S. Senate Campaign, the U.S. Supreme Court struck down Section 304 of the Bipartisan Campaign Reform Act (BCRA) as unconstitutional. The law, codified at 52 U.S.C. § 30116(j), imposed a cap of $250,000 on the use of post-election contributions to retire campaign debt. In a 6-3 decision, a majority of the Court held that the statutory cap on the use of post-election contributions to repay candidate loans violated the First Amendment by limiting core political speech. As a result of the Court’s decision, federal candidates may now utilize an unlimited amount of post-election contributions to repay personal campaign loans.

During his re-election win in 2018, Senator Cruz loaned his campaign $260,000, precisely $10,000 over the limit for repayments set by Section 304 of BCRA. While he was repaid the maximum of $250,000 after the election, the remaining $10,000 could not be repaid, prompting Senator Cruz to file suit against the Federal Election Commission (FEC) and challenge the constitutionality of the loan repayment cap.

From a legal perspective, the Court ended up siding with Senator Cruz’s objections to Section 304’s restrictions on the First Amendment. Justice Roberts, writing for the majority, argued that the barrier to entry created by source of fund limitations on campaign repayment of candidate loans constitutes an unwarranted restriction on political speech. Following in the footsteps of recent Court decisions like McDonnell v. U.S. and McCutcheon v. FEC that have evidenced a healthy skepticism toward campaign finance regulatory overreach, the majority opinion in Cruz explained that the only understandable reason for restricting political speech is to prevent real or apparent quid pro quo corruption by elected officials – a goal that the Court found is already met through existing contribution limits and disclosure laws.

In the wake of the Cruz decision, federal candidates may now loan their campaign an unlimited amount of money, carry that balance forward, and repay themselves with contributions raised after the applicable election. The Court’s decision may also have an impact on certain state laws that impose similar loan repayment restrictions. For example, Georgia law on campaign loan repayment tracks the language of BCRA Section 304 by imposing a $250,000 cap on candidate loan repayments from funds raised in election cycles after the election in which the loan was made. Other states also have varying degrees of restrictions on the abilities of candidates to loan money to their campaigns and how those loans may be repaid. 

Such state laws are likely to see legal challenges in the days ahead based upon similar First Amendment reasoning as set forth in the Cruz ruling. To avoid such disputes, some jurisdictions may issue regulatory guidance addressing loan repayment limitations or even work to amend their laws to align with federal judicial guidance.

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Benjamin Keane

About Benjamin Keane

Ben Keane is a Partner in the Washington, DC and Atlanta, GA offices of Dentons and is co-head of the firm’s Political Law, Ethics and Disclosure Team. Ben is a Chambers & Partners nationally-recognized political law attorney that focuses his practice on the representation of elected officials, political candidates, PACs, SuperPACs, political parties, corporations, non-profit organizations and other entities with regard to federal, state and local election law, campaign finance, lobbying, pay-to-play, and ethics matters.

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Michael Pfeifer

About Michael Pfeifer

Michael Pfeifer is member of Dentons' Political Law, Ethics and Disclosure team. The focus of his practice is providing lobbying, campaign finance, and government ethics compliance counsel and representation to trade associations, political action committees (PACs), corporations and other business entities, non-profit organizations and elected officials at the federal, state and local levels.

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