A federal appeals court in Washington, DC, refused to overturn a Pentagon order designating Anthropic as a national security risk on Friday. The ruling allows the US Department of Defense to keep its restrictions on the company’s Claude AI models in place.
The court’s reasoning
The three-judge panel wrote that the department had sufficient evidence to conclude that integrating Claude into military systems presented a covered national security threat. The judges noted that Anthropic itself admits the company encodes specific restrictions into the model to prevent it from performing certain tasks. The court viewed this as a valid basis for the government to exclude the technology from its supply chain.
Next steps for Anthropic
Danielle Cohen, a spokesperson for the company, stated that Anthropic remains confident in its position and is weighing all available options. This could involve appealing to a broader panel of the DC Circuit Court of Appeals or taking the case to the US Supreme Court.
Earlier this year, the Pentagon sanctioned Anthropic under two separate supply-chain laws. The orders required the removal of Claude models from the military and other federal government sectors by the end of the month. Anthropic executives have stated they would not permit the government to deploy their current AI models to support autonomous weapons or domestic surveillance. Secretary of Defense Pete Hegseth described this stance as a significant national security risk.
Legal and financial context
The designations had to be challenged in separate courts. A federal judge in San Francisco previously struck down one of the labels in March and confirmed that decision last month. However, Friday’s ruling means the other designation stays in place indefinitely. This allows the Pentagon to continue blocking Anthropic’s technology. Both rulings now face the prospect of years of appeals before full resolution.
Immediately following the designations, Anthropic reported lost revenue because customers were concerned about doing business with a government pariah. The company has not provided further updates on how the orders have affected its finances. However, Anthropic has generally touted growing sales in recent months and is moving toward a potential initial public offering of its shares later this year.
Competitors and ethics
The Pentagon has not provided detailed updates on its progress in replacing Claude with alternatives such as SpaceX’s Grok, Google’s Gemini, or OpenAI’s GPT models. Some employees at Google and OpenAI have objected to their employers striking a deal with the US military that Anthropic had rejected, citing ethical concerns. The companies have dismissed these protests and described supporting the US government as crucial.
Historical background
The new decision by a US appeals court in Washington, DC was somewhat expected. In April, the same panel declined to temporarily block the supply-chain risk designation after finding that Anthropic failed to meet stringent requirements for an immediate reprieve.
During a hearing ahead of their ruling, the three judges on the panel challenged both Anthropic and the US government on their arguments and appeared divided on how to rule on blocking the designation completely. The final decision came in a 2-1 vote.
Due process arguments
The majority also rejected Anthropic’s claims that its due process and free speech rights were violated. The judges said the government followed procedure and that the dispute was standard contract negotiations. The Pentagon excluded Anthropic from its supply chain based on the company’s refusal to assent to a contract term that the Department deemed essential, not based on the company’s support for greater governmental regulation of AI technology.
Anthropic had argued that the government had acted beyond what the supply-chain law allows. But for now, the Pentagon and much of the rest of the Trump administration will be able to continue steering clear of Claude ahead of Anthropic’s expected IPO.
What it means
For developers and businesses relying on Anthropic’s tools, the immediate impact is continued uncertainty. Government contracts remain off-limits, and the company faces a prolonged legal battle that could delay its public listing. Competitors now hold a clearer path to federal adoption, even as internal ethical debates continue within their own ranks.
