Anthropic Loses Key Court Fight With Pentagon
Anthropic lost a major legal challenge Friday after a federal appeals court upheld the U.S. government’s decision to exclude the artificial intelligence company from the Pentagon’s supply chain over concerns tied to its restrictions on how Claude can be used. The 2-1 ruling from the U.S. Court of Appeals for the D.C. Circuit leaves the Department of Defense’s designation of Anthropic as a supply-chain risk under the Federal Acquisition Supply Chain Security Act of 2018. “We respectfully disagree with the court’s decision. 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,” a spokesperson for Anthropic told. The decision drew a sharp reaction from Emil Michael, Under Secretary of Defense for Research and Engineering. "[The] hammer of justice has been smashed," he wrote on X, calling Anthropic a "supply chain risk" to the defense industrial base, adding that "no private company will insert their opinions in the chain of command.” Read Also: Deal Dispatch: Jana Calls For Six Flags Review, Cognex Corp Buys RealSense, Brightline Bankruptcy The dispute stems
S. government’s decision to exclude the artificial intelligence company from the Pentagon’s supply chain over concerns tied to its restrictions on how Claude can be used. S. C.
Circuit leaves the Department of Defense’s designation of Anthropic as a supply-chain risk under the Federal Acquisition Supply Chain Security Act of 2018. “We respectfully disagree with the court’s decision. 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,” a spokesperson for Anthropic told.
The decision drew a sharp reaction from Emil Michael, Under Secretary of Defense for Research and Engineering. ” Read Also: Deal Dispatch: Jana Calls For Six Flags Review, Cognex Corp Buys RealSense, Brightline Bankruptcy The dispute stems from a breakdown in negotiations earlier this year over the military’s use of Claude, Anthropic’s family of AI models. Anthropic had agreed to expand the government’s permitted uses of Claude but maintained two restrictions: The models could not be used for lethal autonomous warfare or mass surveillance of Americans. The Department sought contractual language allowing "all lawful uses" of the technology.
When Anthropic refused to remove those restrictions, Defense Secretary Pete Hegseth designated the company as presenting a significant supply-chain risk on March 3 and ordered its products removed from Department systems. The Department also barred contractors from using Anthropic products. A Fight Over AI Guardrails The court’s majority said the government had sufficient grounds to conclude that Anthropic’s continued integration into military systems created a national-security risk.
Anthropic argued that the government could mitigate those concerns by testing individual versions of Claude before deploying them and that the company could not control models after delivering them to contractors. The court rejected those arguments, pointing to the way Anthropic embeds restrictions into Claude that can cause the model to refuse certain requests. Anthropic had previously developed a specialized Claude Gov model after standard commercial versions refused some national-security-related work.
The company ultimately allowed the government to use Claude for areas including weapons-system design, foreign intelligence analysis and offensive cyber operations, while retaining its restrictions on autonomous lethal weapons and mass surveillance. Anthropic’s Legal Fight Continues Anthropic also argued that the government’s action violated its constitutional rights and amounted to retaliation for its position on AI safety. The appeals court rejected those claims, saying the government acted because Anthropic refused to accept a contract term officials considered essential, rather than because of the company’s advocacy around AI policy.
A separate federal court in California previously ruled against a related government designation involving the company. That case involved a different statutory framework, meaning the two rulings address separate legal questions. For Anthropic, the split decisions leave the company facing continued restrictions on its ability to work with the Pentagon even as its legal challenges to the administration continue. The case also underscores a growing tension in the AI industry: As governments increasingly rely on frontier AI systems for national-security work, companies are still seeking to retain control over how those models can be deployed.
C. Circuit’s majority acknowledged that tension, writing that the case raised difficult questions about the government’s use of increasingly powerful AI systems and who should decide how those systems are deployed in military operations. Read Also: Anthropic’s Founders Are Making a Power Grab Before Going Public Photo: Shutterstock