Late last week, the Supreme Court indicated that it intends to review a challenge by Senator Ted Cruz (R-TX) to federal limits on the use of post-election contributions to repay pre-election loans that candidates make to their own campaigns.  This follows an earlier three-judge district court decision that struck down those limits as unconstitutional under the First Amendment.  Although the question presented in Federal Election Commission v. Ted Cruz for Senate relates most directly to the relatively obscure rules governing the repayment of candidate loans, the case represents a continuation of the steady shift in the courts towards a less restrictive federal campaign finance system.

For decades, courts considering constitutional challenges to federal campaign finance regulations have weighed the government’s interest in preventing actual or perceived corruption against individual speech rights protected by the First Amendment.  Most famously, in Buckley v. Valeo, the Supreme Court upheld federal contribution limits as a means of preventing even the appearance of quid pro quo corruption while at the same time striking down campaign expenditure limits that the Court found did little to prevent actual or perceived political corruption.  Since Buckley, this emphasis on the degree to which a challenged regulation serves as an effective check on actual or perceived corruption has been a central feature of federal campaign finance law.

Though never explicitly retreating from this basic proposition, in recent years the Supreme Court has taken an increasingly cramped view of what actually constitutes political corruption.  For instance, the Supreme Court has rejected as insufficiently compelling the prevention of “generic favoritism or influence” (McConnell v. FEC) or merely seeking “influence over or access to” elected officials (Citizens United v. FEC).  Most recently, in McCutcheon v. FEC, the Court struck down aggregate individual contribution limits on the grounds that those limits did “little, if anything,” to address explicit quid pro quo corruption.  Cruz may be the latest example of this trend.

Indeed, a close reading of the earlier district court decision suggests that the case may have significant implications well beyond the loan-repayment rules themselves.  Most notably, the district court imposed a remarkably high factual burden in considering whether the loan-repayment rules serve to prevent demonstrable corruption.  The “appearance” of corruption, in either the form of how the public perceived these payments, or what donors expected, carried nearly no weight in the analysis.  Instead, it was actual corruption the government needed to show.  In striking down the rules, the court noted that the government did “not identif[y] a single case of actual quid pro quo corruption” in the context of the loan‑repayment limit, which the court contrasted with prior cases in which the government put forward evidence of an anti-corruptive effect through witness testimony and detailed factual findings.  According to the court, even “[a] lengthy record may not be sufficient to demonstrate corruption, but the absence of any record of such corruption undermines the government’s proffered interest.”

While the fate of the loan-repayment rules may be of little interest to those not currently running for office, the Court’s consideration of these little-noticed rules may offer important insights into the future of campaign finance regulation more broadly.  If the Supreme Court affirms the district court’s approach, rules that currently may have a weaker connection to threats of “actual corruption”—for example, spousal contribution limits and the remaining restrictions on independent corporate political activities (facilitation of contributions, communications to all employees, etc.)—may be the next to face a challenge.

In the meantime, if the district court decision stands, we would expect all future candidates to cease “contributing” to their campaigns and recast those payments as loans, with a suitable rate of interest.  Striking down the limits on post-election contributions to repay loans may also incentivize candidates who believe they can win to boost late-race self-funding.  This change could also mean that incumbent officeholders with such loans on the books will be more attentive to the fundraising needed to ensure that the loans are repaid.

This post was written with research assistance from Summer Associate Jacob Lichtenstein.