Federal court says Pentagon can label Anthropic a supply chain risk

In the latest twist in Anthropic’s dispute with the Pentagon, a federal appeals court on Friday rejected the artificial intelligence lab’s challenge to the government’s labeling of it as a supply chain risk.

The decision allows the Pentagon to continue to remove Anthropic’s Claude models from its systems and bar the use of its products for Defense Department work. Judges from the U.S. Court of Appeals for the District of Columbia Circuit ruled 2-1 in the Pentagon’s favor.

“Today’s DC Circuit Court ruling completely validates the Department’s position,” the Pentagon’s top spokesman, Sean Parnell, wrote in a social media post.

The dispute between the AI company and the government broke out in February when President Donald Trump and Defense Secretary Pete Hegseth accused Anthropic of endangering national security and designated the company a supply chain risk. Anthropic CEO Dario Amodei refused to back down over concerns the company’s products could be used for mass surveillance or autonomous armed drones.

The ruling is separate from one this summer in California, where a federal judge found the Pentagon acted illegally by punishing the AI company for its criticism of the Pentagon’s views on AI use. This case, which was filed earlier this year in Washington, D.C., focused on a different rule the Pentagon was using to try to declare Anthropic a supply chain risk.

The majority opinion states the Pentagon had “ample support” for its actions. It notes that by Anthropic’s own admission, “the company encodes restrictions into Claude that prevent the model from performing tasks that Anthropic wishes to prevent.”

“The Department reasonably feared that Anthropic might manipulate Claude’s design to prevent it from performing national-security functions that the Department deems contractually authorized and necessary,” Judge Gregory G. Katsas wrote in the majority opinion. Both Katsas and Judge Neomi Rao, who formed the majority, were nominated by Trump. The sole dissenter, Judge Karen LeCraft Henderson, was nominated by Republican President George H. W. Bush.

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The judges said that they have “no reason to doubt” that Anthropic acts with “noble intentions” in restricting Claude, specifically with respect to its concerns around privacy and AI safety. But they said the definition of a supply chain risk in this context hinges “on what Anthropic does, not why Anthropic does it.”

An Anthropic spokesperson said in a written statement the company “respectfully disagrees” with the court’s decision. “Another federal court has already held the government’s parallel designation unlawful,” the statement continued. “We remain confident in our position and are considering all options, including further review.”

The judges who ruled against Anthropic said they had “no quarrel” with the conclusions of the the separate case that was filed in San Francisco, but they found that a “bad motive” on Anthropic’s part is not required to support a supply chain risk designation.

The Department of Defense began removing Claude from its workflows earlier this year, and the ruling upholds its ability to do so, including prohibiting contractors from using Anthropic products in their work for the department. Anthropic’s products are not barred from the federal government as a whole under this ruling.

The White House did not immediately respond to a request for comment.