US Appeals Court Upholds Pentagon's 'Supply Chain Risk' Designation of Anthropic

A federal appeals court in Washington, D.C., ruled 2-1 on Friday to uphold the U.S. Department of Defense's designation of AI company Anthropic as a "supply chain risk," finding that any partnership between the company and the federal government constitutes a national security risk under the relevant statute.

Judge Gregory Katsas, writing for the majority on the U.S. Court of Appeals for the D.C. Circuit, said the government's blacklisting was lawfully "based on the company's refusal to assent to a contract term that the Department deemed essential." The court also rejected Anthropic's argument that the designation violated its First Amendment-protected right to free speech.

Anthropic said it disagrees with the ruling and noted that another federal court has already found the government's parallel designation unlawful. The company is considering all options, including a rehearing or an appeal to the Supreme Court.

Anthropic and the Department of Defense first partnered in July 2025 in a $200 million deal to "prototype frontier AI capabilities that advance U.S. national security." In February, reports said Claude was used by the U.S. military during an operation in Caracas. Anthropic CEO Dario Amodei later said the company would not allow the federal government to use its technology for domestic surveillance or fully autonomous weapons systems.

Anthropic filed two lawsuits against the Department in March, calling the supply chain risk label "unprecedented and unlawful." The company was ordered in June to cut off access to its then-most powerful models. More recently, Trump has mocked Amodei's calls for a slowdown among frontier AI labs as a "hoax."