Paper cups only come into contact with liquid on the inside surface, which has a protective wax coating, while the outside surface of a cup stays dry.
Straws are totally immersed and contact the liquid on all surfaces. If you submerged a paper cup into water the same way as you do a straw, it would also get soggy.
It would require an all-around wax coating of a paper straw to protect it, which would make them too expensive and maybe not as environmentally friendly.
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