A federal appeals court has upheld the Pentagon’s designation of Anthropic as a national security supply chain risk in a 2-1 decision. The ruling preserves the company’s blacklisting from military contracts, deepening a high-stakes legal and political clash over artificial intelligence guardrails and military strategy.
D.C. Circuit Court Rejects Anthropic Appeal
The U.S. Court of Appeals for the District of Columbia Circuit ruled 2-1 against Anthropic on Friday, upholding the Pentagon’s designation of the artificial intelligence company as a national security supply chain risk. Writing for the majority, Judge Gregory Katsas concluded that the Department of Defense had adequately demonstrated that keeping Claude embedded in its information systems created a statutory risk to national security. Judge Neomi Rao joined the majority, while Judge Karen Henderson dissented.
The appellate panel stayed its ruling temporarily, preserving Anthropic’s legal avenues. The company can now request a panel rehearing, pursue an en banc review by all D.C. Circuit judges, or carry the case to the Supreme Court.
We respectfully disagree with the court’s decision, [and] another federal court has already held the government’s parallel designation unlawful. We remain confident in our position and are considering all options, including further review.
Anthropic spokesperson, via Gizmodo and Yahoo
Contradictory Rulings Across Federal Courts
While the D.C. Circuit backed the Pentagon, a San Francisco federal judge ruled last month that a parallel DOD designation was illegal and baseless. U.S. District Judge Rita Lin found that the government had retaliated against Anthropic in violation of the First Amendment, writing in a 59-page decision that the empty invocation of national security is not a blank check to punish government critics.
Because the Pentagon initially grounded its blacklisting in two separate legal designations, each track required separate litigation. The San Francisco ruling permanently blocked federal agencies from enforcing President Donald Trump’s executive order to phase out Claude in that jurisdiction, whereas the D.C. Circuit’s latest decision leaves the military contracting ban in force under the second legal mechanism.
Origins of the Clash Over Autonomous Weapons and Surveillance
The bitter dispute traces back to a $200 million contract established in July of last year, through which Anthropic agreed to prototype frontier AI capabilities for national security. Tensions boiled over after reports indicated Claude was used during a U.S. military operation in Caracas to capture Venezuelan President Nicolás Maduro and his wife, Cilia Flores. Anthropic CEO Dario Amodei subsequently stated that the company would not permit its technology to be used for domestic mass surveillance or fully autonomous lethal weapons.
Defense Secretary Pete Hegseth rejected those restrictions, arguing that the Department of War must have full, unrestricted access to any lawful use of AI.
a master class in arrogance and betrayal as well as a textbook case of how not to do business with the United States Government or the Pentagon.
Pete Hegseth, Secretary of War, via Gizmodo
On the same day, President Trump issued a directive on Truth Social ordering every federal agency to immediately cease all use of Anthropic’s technology, accusing the company of trying to strong-arm the military into obeying its terms of service instead of the Constitution.
Wider Industry Shift and Upcoming Business Milestones
As the legal battle unfolded, the Pentagon moved swiftly to incorporate other major artificial intelligence providers. Rival companies, including Google, OpenAI, Microsoft, and Amazon Web Services, struck deals to bring their technologies onto the department’s classified networks. Meanwhile, Anthropic was notably absent from a recent White House dinner honoring Chinese President Xi Jinping, an event attended by the leadership of Meta, OpenAI, Google, Nvidia, and SpaceXAI.
Despite being shut out of federal contracts, Anthropic's broader commercial standing remains strong. The company recently reported quarterly revenues of $11.5 billion and is preparing for an initial public offering that could value the firm at $2 trillion.
