In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 21-2589
CAMELOT BANQUET ROOMS, INC., et al.,
                                                 Plaintiffs-Appellees,
                                 v.

UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
                                    Defendants-Appellants.
                     ____________________

         Appeal from the United States District Court for the
                   Eastern District of Wisconsin.
          No. 2:21-CV-00447-LA — Lynn Adelman, Judge.
                     ____________________

           ON MOTION FOR STAY PENDING APPEAL

                  DECIDED SEPTEMBER 15, 2021

   Before KANNE, ROVNER, and HAMILTON, Circuit Judges.
    PER CURIAM. Plaintiffs in this case are about fifty busi-
nesses all over the country that offer live adult entertainment
in the form of nude or nearly nude dancing. They seek to ob-
tain loans under the second round of the Paycheck Protection
Program enacted by Congress to address economic disrup-
tion caused by the Covid-19 pandemic. By statute, Congress
excluded plaintiffs and several other categories of businesses
2                                                   No. 21-2589

from the second round of the Program. See 15 U.S.C.
§ 636(a)(37)(A)(iv)(III)(aa), incorporating 13 C.F.R. § 120.110,
with two exceptions.
    Plaintiffs assert that their exclusion from the Program vio-
lates their constitutional rights, primarily under the Free
Speech Clause of the First Amendment. The district court
agreed. It issued a preliminary injunction that enjoins the
United States Small Business Administration (SBA) from
denying plaintiffs eligibility for the loan program based on
the statutory exclusion that incorporates 13 C.F.R. § 120.110.
Camelot Banquet Rooms, Inc. v. U.S. Small Business Admin., — F.
Supp. 3d —, 

 (E.D. Wis. Aug. 19, 2021). The
SBA has appealed and seeks a stay of the injunction pending
appeal. The district court denied a stay on August 31. Camelot
Banquet Rooms, Inc. v. U.S. Small Business Admin., — F. Supp.
3d —, 

 (E.D. Wis. Aug. 31, 2021). Later that
day we issued a temporary stay pending expedited briefing
on the stay issue, which was completed on September 9.
    We now grant the government’s stay of the preliminary
injunction and expedite briefing on the merits of this appeal.
The government’s merits brief shall be filed no later than Sep-
tember 29, 2021; plaintiffs shall file their brief no later than
October 13, 2021; and the government shall file any reply brief
no later than seven days after plaintiffs file their brief. The
court will contact counsel to schedule oral argument
promptly.
I. Applicable Legal Standards
    Plaintiffs who seek a preliminary injunction must show
that (1) they will suffer irreparable harm in the absence of an
injunction, (2) traditional legal remedies are inadequate to
No. 21-2589                                                      3

remedy the harm, and (3) they have some likelihood of suc-
cess on the merits. If those elements are shown, the court must
then balance the harm the moving parties would suffer with-
out an injunction against the harm the opposing parties
would suffer if one is granted, and the court must consider
the public interest, which takes into account the effects of a
decision on non-parties. E.g., Courthouse News Service v.
Brown, 

, 1068 (7th Cir. 2018).
    On the merits, the district court concluded that plaintiffs
are likely to succeed on their free speech claim. The court
viewed the exclusion of plaintiffs from the Program as an “at-
tempt to suppress a dangerous idea” and a classification that
was not rationally related to a legitimate government pur-
pose. The court found that the other factors also supported an
injunction. Receiving funds under the Program only at the
end of the lawsuit would likely come too late for plaintiffs’
businesses to survive, and they would have no viable dam-
ages remedy against the government or any official. The court
saw little harm to the government from an injunction, which
it thought would also serve the public interest by aiding
struggling businesses, consistent with the aims of the broader
Covid relief legislation.
    On appeal, we review the district court’s issuance of a pre-
liminary injunction for an abuse of discretion, though an error
of law can often produce an abuse of discretion. E.g., Cooter &
Gell v. Hartmarx Corp., 

, 405 (1990); Ty, Inc. v. Jones
Group, Inc., 

, 896 (7th Cir. 2001); Abbott Labs. v.
Mead Johnson & Co., 

, 13 (7th Cir. 1992).
   In deciding whether to stay an injunction pending appeal,
we apply a standard that parallels the preliminary injunction
standard but also keeps in mind the district court’s exercise of
4                                                    No. 21-2589

equitable discretion. A party seeking a stay must show a like-
lihood of success on the merits and a threat of irreparable
harm absent a stay. If those criteria are satisfied, we must con-
sider the balance of harms, primarily in terms of the balance
of risks of irreparable harm in case of a judicial error, and we
must consider the public interest, which refers primarily to
the interests of those who are not parties to the suit. See gen-
erally Nken v. Holder, 

, 426 (2009); Whole Woman’s
Health Alliance v. Rokita, — F.4th —, 

 (7th Cir.
Sept. 8, 2021) (granting stay pending appeal); Illinois Republi-
can Party v. Pritzker, 

, 762–63 (7th Cir. 2020) (not-
ing earlier denial of injunction pending appeal).
    We conclude that the SBA has satisfied the demanding
standard for a stay of an injunction pending appeal. As we
explain below, at this preliminary stage, the SBA has shown a
strong likelihood of success on the merits. The other factors
are essentially a wash, so the final result is driven by the like-
lihood of success on the merits.
II. The Paycheck Protection Program
    No American who has lived through the Covid-19 pan-
demic will forget its devastating consequences for lives and
health or the massive economic disruption it has caused. Con-
gress responded with several rounds of massive economic as-
sistance, including the Paycheck Protection Program. Under
the Program, many small businesses became eligible for low-
interest loans that would be guaranteed by the federal gov-
ernment and even eligible for forgiveness if the businesses
used them, in essence, to keep employees on the payroll dur-
ing the economic downturn.
No. 21-2589                                                     5

    The first round of legislation gave the SBA considerable
discretion to decide eligibility for the Program. In doing so,
the SBA borrowed from a regulation that identifies categories
of businesses that are not eligible for all or nearly all SBA loan
programs. 13 C.F.R. § 120.110. The list includes non-profit en-
terprises, banks and other financial companies, life insurance
companies, businesses located in foreign countries, pyramid
sale distribution plans, casinos and other gambling busi-
nesses, loan packagers, political or lobbying businesses, and
speculative businesses.
   Subsection (p) of that regulation excludes plaintiffs. It
bars:
   Businesses which:
       (1) Present live performances of a prurient sexual na-
       ture; or
       (2) Derive directly or indirectly more than de minimis
       gross revenue through the sale of products or services,
       or the presentation of any depictions or displays, of a
       prurient sexual nature….
§ 120.110(p).
    In the first round of Paycheck Protection Program loans,
the SBA made an exception for non-profits, which the statute
expressly deemed eligible. See 85 Fed. Reg. 20811, 20812 (Apr.
15, 2020). In an earlier related case brought by plaintiff Cam-
elot Banquet Rooms in the Eastern District of Wisconsin, the
district court issued a preliminary injunction barring denial of
eligibility for the Program based on the regulation. That deci-
sion relied on statutory, administrative law, and constitu-
tional grounds. Camelot Banquet Rooms, Inc. v. U.S. Small Busi-
ness Admin., 

 (E.D. Wis. 2020). We denied
6                                                             No. 21-2589

a stay of that injunction in a conclusory order, and the gov-
ernment soon dismissed the appeal. But see Pharaohs GC, Inc.
v. U.S. Small Business Admin., 

 (2d Cir. 2021) (af-
firming denial of injunction in similar first-round case
brought by adult-entertainment club); American Ass’n of Polit-
ical Consultants v. U.S. Small Business Admin., 810 F. App’x 8,
9–10 (D.C. Cir. 2020) (affirming denial of injunctive relief in
similar First Amendment challenge to first-round exclusion of
lobbying and political consulting businesses).
    The second round of the Paycheck Protection Program
took a different approach to eligibility. Congress adopted
statutory language to exclude several categories of busi-
nesses, including plaintiffs’ adult-entertainment venues. It
did so by incorporating into the statute the terms of 13 C.F.R.
§ 120.110, the regulation that the SBA had used on its own
initiative    for     the       first round.     15      U.S.C.
§ 636(a)(37)(A)(iv)(III)(aa). 1


    Accordingly, in this second round, the earlier issues of
statutory interpretation and administrative law have fallen
away. Plaintiffs can prevail only if denying them a subsidized
loan under the Program violates the Constitution. Plaintiffs
seem unlikely to be able to make that showing.


    1 Congress made exceptions for two categories of businesses in the
regulation, not-for-profit businesses and businesses engaged principally
in teaching, instructing, counseling, or indoctrinating religion or religious
beliefs. 15 U.S.C. § 636(a)(37)(A)(iv)(III)(aa). The new exception for reli-
gious businesses is easy to understand in light of Trinity Lutheran Church
v. Comer, 

 (2017) (religious school could not be excluded
from government program to assist school playground construction). The
Supreme Court has shown no indication that it would extend the Free Ex-
ercise Clause reasoning of Trinity Lutheran to cases like this one.
No. 21-2589                                                     7

III. Plaintiffs’ First Amendment Theory
    Plaintiffs’ core claim is under the Free Speech Clause of
the First Amendment. They contend that excluding them
from the Program penalizes them for engaging in expressive
activity protected by the First Amendment. See generally
Barnes v. Glen Theatre, Inc., 

, 565–66 (1991) (plural-
ity opinion) (treating nude dancing as “marginally” within
outer perimeters of First Amendment protection; affirming
local ban on completely nude dancing).
    The problem with plaintiffs’ First Amendment claim and
the preliminary injunction here is that Congress is not trying
to regulate or suppress plaintiffs’ adult entertainment. It has
simply chosen not to subsidize it. Such selective, categorical
exclusions from a government subsidy do not offend the First
Amendment.
    The Supreme Court has repeatedly drawn a line between
government regulation of speech, on one hand, and govern-
ment subsidy of speech on the other. Its decisions show that
the government is not required to subsidize activity simply
because the activity is protected by the First Amendment.
E.g., Ysursa v. Pocatello Education Ass’n, 

, 358–59
(2009) (“While in some contexts the government must accom-
modate expression, it is not required to assist others in fund-
ing the expression of particular ideas, including political
ones”; state could choose not to carry out payroll deductions
for political contributions to labor unions); Rust v. Sullivan,

, 193 (1991) (“The Government can, without vio-
lating the Constitution, selectively fund a program to encour-
age certain activities it believes to be in the public interest,
without at the same time funding an alternative program
which seeks to deal with the problem in another way. In so
8                                                       No. 21-2589

doing, the Government has not discriminated on the basis of
viewpoint; it has merely chosen to fund one activity to the ex-
clusion of the other.”); Regan v. Taxation With Representation,

, 549 (1983) (“[A] legislature’s decision not to sub-
sidize the exercise of a fundamental right does not infringe
the right….”); accord, e.g., Wisconsin Education Ass’n Council
v. Walker, 

, 646–47 (7th Cir. 2013).
    To avoid the controlling line of subsidy cases, plaintiffs fo-
cus on language in Regan suggesting that a selective subsidy
program may violate the First Amendment if it is “aim[ed] at
the suppression of dangerous ideas.” 

. To take
an easy example, even if Congress can exclude lobbyists en-
tirely from the Program’s subsidies, it could not choose to
subsidize Democratic lobbyists while excluding Republicans.
Plaintiffs’ theory here is that Congress chose to exclude their
businesses from the subsidy program because it deemed their
“ideas” about sexuality to be dangerous.
    This theory does not seem to distinguish between govern-
ment suppression of protected activity and denial of a subsidy.
Plaintiffs’ theory seems to be that the denial of a subsidy is
itself the act of suppression. That theory loses sight of the differ-
ence between regulation and denial of a subsidy—the differ-
ence at the heart of Regan, Rust, Ysursa, and the rest of the se-
lective-subsidy line of cases. The only sign we see here of a
supposed effort to “suppress” is the choice not to subsidize.
Whatever door Regan left open—and as far as we can tell, the
Supreme Court has never struck down a denial of subsidy on
this ground—it surely requires something more, like view-
point discrimination, than denial of the subsidy itself. See
Wisconsin Education Ass’n, 705 F.3d at 650–52, and id. at 664–
No. 21-2589                                                    9

70 (Hamilton, J., dissenting in relevant part) (majority and dis-
sent debating evidence of viewpoint discrimination in state’s
choice to subsidize payroll deductions for dues for some pub-
lic employee unions but not others).
IV. Rational-Relation Review
    Like any statutory classification, the statutory boundaries
of the Paycheck Protection Program are subject to rational-re-
lation review. See, e.g., Ysursa, 

 citing Regan,

–51. The district court found here that the ex-
clusion of plaintiffs’ adult-entertainment businesses fails the
rational-relation test.
    The district court appears to have applied an erroneous
and unduly rigorous form of judicial review, second-guessing
legislative decisions and compromises on policy grounds,
and concluding that the Program was over- and under-inclu-
sive in various respects. See Camelot Banquet Rooms, Inc., — F.
Supp. 3d at —, 

, at *8–11. A government
spending program, especially one responding to an economic
emergency, is subject to the least rigorous form of judicial re-
view. In enacting such legislation, Congress must respond
quickly to an emergency and must hammer together a coali-
tion of majority votes in both houses. The need for compro-
mises and trade-offs is never greater.
    When pressed in this suit to justify the exclusion of plain-
tiffs from the Program’s subsidies, the government pointed to
the “secondary effects” of sex-oriented businesses that can be
used to justify time, place, and manner regulations of such
businesses. See, e.g., City of Erie v. Pap’s A.M., 

(2000) (plurality opinion); BBL, Inc. v. City of Angola, 

 (7th Cir. 2015). Plaintiffs and the district court responded
10                                                   No. 21-2589

by criticizing Congress for not having made a record on the
subject at the time the legislation was enacted.
    Any expectation that Congress would have taken the time
to make such a record would seem unrealistic, to put it mildly.
Any expectation or demand that Congress must make such a
record is contrary to constitutional doctrine. The rational-re-
lation test requires a challenger in litigation to exclude any
possible rational grounds that the legislature might have
deemed sufficient grounds for the statutory distinction. E.g.,
Heller v. Doe, 

, 319–20 (1993). It does not require
the legislature to have made a contemporaneous record on
the subject. 

–21, discussed in Wisconsin Education
Ass’n, 705 F.3d at 653 (rational basis for limit on government
subsidies need not be in the record “so long as it finds ‘some
footing in the realities of the subject addressed by the legisla-
tion’”).
    Similarly, plaintiffs’ and the district court’s assertion that
the rationale for excluding plaintiffs is under-inclusive is not
easy to reconcile with the rational-relation test. All sorts of
legislative classifications, exclusions, and compromises pass
muster even if they are over- or under-inclusive. “[C]ourts are
compelled under rational-basis review to accept a legisla-
ture’s generalizations even when there is an imperfect fit be-
tween means and ends. A classification does not fail rational-
basis review because it ‘is not made with mathematical nicety
or because in practice it results in some inequality,’” and
“[t]he problems of government are practical ones and may
justify, if they do not require, rough accommodations—illog-
ical, it may be, and unscientific.” Heller, 

 first
quoting Dandridge v. Williams, 

, 485 (1970), and
No. 21-2589                                                    11

then quoting Metropolis Theatre Co. v. City of Chicago, 

, 69–70 (1913).
    Plaintiffs also suggest that the government’s defense
based on secondary effects of sex-oriented businesses actually
serves to condemn their exclusion from the Program. They
say the arguments show the government’s hostility to their
“dangerous ideas.” This argument seems to turn the rational-
relation test upside down. Those secondary effects are well-
known and widely recognized in First Amendment litigation
and doctrine. See generally, e.g., City of Erie, 

–
301 (plurality opinion). Actual evidence of them can serve to
justify time, place, and manner restrictions on businesses that
are subject to “intermediate” constitutional scrutiny. Relying
on those effects does not show animus toward any idea. If
those effects can support time, place, and manner regulations,
they surely provide a rational basis for Congress to choose not
to subsidize this group of businesses.
    Plaintiffs’ arguments also seem to lose sight of the fact that
they were not singled out for this exclusion, even among busi-
nesses primarily engaged in activity protected by the First
Amendment. Congress also chose to exclude from the Pro-
gram businesses “primarily engaged in political or lobbying
activities.” 13 C.F.R. § 120.110(r). Such business activities are
much closer to the core of the First Amendment than the
dances at plaintiffs’ bars and clubs. Yet lobbyists and political
consultants were also excluded. Congress chose not to require
taxpayers to subsidize them. We do not see a plausible consti-
tutional basis for requiring government subsidies of lobbyists,
at least as long as there is no viewpoint discrimination. Ac-
cord, American Ass’n of Political Consultants, 810 F. App’x at 9–
10.
12                                                           No. 21-2589

    Congress also excluded many other categories of busi-
nesses: banks, lenders, finance companies, and some pawn
shops; life insurance companies; businesses located in foreign
countries; pyramid sale distribution plans; businesses en-
gaged in any illegal activity; private clubs; government-
owned businesses; loan packagers; businesses with an “Asso-
ciate” who is in prison, on probation, on parole, or who has
been indicted for a felony or crime of moral turpitude; and
businesses that have previously defaulted on SBA or other
federally       assisted      loans.     See     15       U.S.C.
§ 636(a)(37)(A)(iv)(III)(aa), incorporating 13 C.F.R. § 120.110,
with two exceptions.
    These exclusions are not difficult to understand in terms
of policy and politics. They all help defuse potential “gotcha”
criticisms of this generous emergency program that might be
used to undermine political support for the Program and the
overall legislation. Such tailoring of legislation to build and
maintain political support is perfectly constitutional, at least
in the absence of viewpoint or invidious discrimination, of
which we see no signs here. 2
V. Viewpoint Discrimination
   The district court was persuaded to apply more stringent
judicial review. The theory was that even if the exclusion of
plaintiffs’ businesses from the Program was not “traditional


     2The Constitution does not prohibit legislation on the basis of moral-
ity. Consider, for example, the possibility that Congress might choose to
exclude from this or other subsidy programs alcoholic beverage makers,
casinos and other gambling businesses, weapons makers, and so on. Such
line-drawing is left to the legislature, absent viewpoint or invidious dis-
crimination.
No. 21-2589                                                   13

viewpoint discrimination,” the exclusion’s focus on “pruri-
ence” created a free speech problem. The exclusion, as the
court saw the issue, depends on prurience, which the court
saw as the expressive, “sexually arousing” “message” of the
adult entertainment. Camelot Banquet Rooms, Inc., — F. Supp.
3d at — & n.7, 

, at *9–10 & n.7. The court
viewed the exclusion as thus an effort to use a subsidy exclu-
sion to suppress a “dangerous idea,” which Regan suggested
could violate the First Amendment. 

.
    Plaintiffs’ argument along these lines is creative but is not
consistent with the role that prurience plays in the larger
sweep of First Amendment doctrine. The statutory exclusion
from the Program of businesses with prurient live entertain-
ment is better understood not as viewpoint discrimination but
as a permissible classification based on subject matter. The Su-
preme Court made this point in R.A.V. v. City of St. Paul:
       When the basis for the content discrimination
       consists entirely of the very reason the entire
       class of speech at issue is proscribable, no signif-
       icant danger of idea or viewpoint discrimina-
       tion exists. Such a reason, having been adjudged
       neutral enough to support exclusion of the en-
       tire class of speech from First Amendment pro-
       tection, is also neutral enough to form the basis
       of distinction within the class. To illustrate: A
       State might choose to prohibit only that obscen-
       ity which is the most patently offensive in its
       prurience—i.e., that which involves the most las-
       civious displays of sexual activity. But it may
       not prohibit, for example, only that obscenity
       which includes offensive political messages.
14                                                  No. 21-2589

, 388 (1992), citing Kucharek v. Hanaway, 

, 517 (7th Cir. 1990).
    In effect, the Court was telling us, it would be a category
mistake to think that prurience or lasciviousness reflects a
“viewpoint” that the government may not discriminate
against. The terms instead identify a category or subject matter
of expressive conduct that may be subject to some forms of
government regulation. That’s the point we made in the Ku-
charek case cited in R.A.V. We said that a statute could prohibit
obscene (prurient) material entirely (a subject matter) but
could not “distort the marketplace of erotic discourse by sup-
pressing only that obscenity which conveys a disfavored mes-
sage.” 

.
    Accordingly, excluding the entire category or subject mat-
ter of prurient live performances from a government subsidy
program does not violate the Free Speech Clause. See Pharaohs
GC, 990 F.3d at 231 (term “prurient” in SBA regulation de-
scribes subject matter, not viewpoint, for exclusion from Pro-
gram); PMG Int’l Division L.L.C. v. Rumsfeld, 

,
1171 (9th Cir. 2002) (treating “lascivious” materials as articu-
lating a “viewpoint” would “risk eviscerating altogether the
line between content and viewpoint”); General Media Commu-
nications, Inc. v. Cohen, 

, 282 (2d Cir. 1997)
(“[H]ow, for example, would one go about discussing and
considering the political issues of the day from a lascivious
viewpoint?”).
VI. Other Factors for Stay Pending Appeal
    Finally, the other factors for a stay pending appeal either
favor the government or are neutral. Each side faces a threat
of irreparable harm, depending on whether the injunction
No. 21-2589                                                15

goes into effect or is stayed. If the government were errone-
ously required to guarantee subsidized loans to plaintiffs,
there is no reason to expect that it could ever recover such
funds. Because the government seems so likely to prevail on
the merits, a stay serves the public interest by implementing
the policy chosen by Congress. On the other hand, if the gov-
ernment were unlikely to prevail on the merits, denial of a
stay would serve the public interest by enforcing constitu-
tional rights and allowing plaintiffs to take advantage of a
generous program of emergency economic relief. On balance,
the government’s strong likelihood of success on the merits of
this challenge to plaintiffs’ exclusion from a government sub-
sidy program persuades us that we should stay the prelimi-
nary injunction and expedite briefing and decision on the
merits of this appeal.
   So ordered.