For years, scholars of elections have argued about whether campaign finance limitations adversely affect electoral competition. In this article, we examine how the institutional campaign finance restrictions differentially affect the performance of incumbents and challengers. Using elections for the state high court bench between 1990 and 2004, we demonstrate that candidate spending in judicial elections has diminishing marginal returns, but that the returns to challenger spending diminish more slowly than incumbent spending. Since this is the case, campaign finance restrictions that limit candidate spending disproportionately harm challengers, increasing the incumbency advantage and decreasing electoral competition. More specifically, we show that states with more stringent contribution limits have lower levels of candidate spending, and these restrictions thus put challengers at a competitive disadvantage.