Senator Ted Cruz Wins Legal Challenge Over Campaign Finance Rules

A federal court in Washington D.C. ruled that a campaign finance rule limiting politicians’ ability to repay personal loans they make to their campaigns runs afoul of the First Amendment.

Republican Senator Ted Cruz interrogates Biden administration appointees at a Wednesday, April 14, 2021, hearing of the Senate Judiciary Committee. (Image via Courthouse News)

(CN) — A federal court in Washington D.C. ruled in favor of Texas Republican Senator Ted Cruz in a lawsuit against the Federal Election Commission challenging a cap on how much money candidates can use after an election to reimburse themselves for pre-election loans.

A three-judge panel of the U.S. District Court for the District of Columbia unanimously rejected arguments from the FEC that the rule is necessary to prevent quid pro quo corruption, ruling instead that the cap unfairly restricts candidates’ free speech.

“A candidate’s loan to his campaign is an expenditure that may be used for expressive acts. 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,” U.S. District Judge Neomi Rao, a Trump appointee, wrote on behalf of the panel.

Rao was joined in the decision by U.S. District Judges Amit Mehta, an Obama appointee, and Timothy Kelly, a Trump appointee.

Cruz’s lawsuit challenged Section 304 of the Bipartisan Campaign Reform Act of 2002, which prohibits political candidates from using post-election contributions to repay personal campaign loans over $250,000.

Cruz and his campaign alleged that Section 304’s loan payment limit violates the First Amendment and burdens political speech by limiting campaign expenditures and contributions.

The limit applies to third-party loans secured by the candidate and loans from the candidate’s personal funds.

Cruz made loans totaling $260,000 to his 2018 campaign for reelection to the U.S. Senate the day before the general election. $255,000 of the total amount came from a third-party lender secured with Cruz’s personal assets.

The campaign went on to repay Cruz the maximum $250,000 with post-election contributions, leaving a $10,000 loan balance which was deemed a campaign contribution from Cruz.

Cruz sued the FEC in April 2019, arguing that the law imposed “arbitrary restrictions on core political speech by candidates, their campaign committees, and their supporters.”

During an October hearing in the case, an attorney for the FEC argued that the repayment cap is a “very targeted restriction” which is necessary to guard against the risk or appearance of corruption when elected politicians seek post-election contributions from donors.

But the panel ruled Thursday that the FEC failed to provide any evidence showing that restrictions like the loan-repayment limit actually prevent quid pro quo corruption.

The ruling criticizes the FEC’s “cramped understanding of the First Amendment” and says that the government’s concerns about corruption “boil down to hypothetical concerns about influence and access to incumbents.”

“With little connection to any actual or perceived quid pro quo corruption interest, the FEC’s asserted rationale boils down to a general concern about money in politics and campaign contributions to incumbents — but such general concerns about influence or access cannot justify government regulation in the vital area of political speech,” the 31-page opinion states.

The ruling also points out that the limitation is “insufficiently tailored” and applies equally to candidates who lose their races and would therefore have no way to provide “improper benefits” to donors.

When contacted, a spokesperson for the FEC said the commission does not comment on litigation.

The decision is one of several over the past decade to chip away at campaign finance rules, including the Supreme Court’s 2010 ruling in Citizens United v. FEC which struck down restrictions on corporate political spending and 2014 ruling McCutcheon v. FEC which removed aggregate donation limits for individuals.

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