A federal appeals court in Washington, DC, on Friday declined to overturn a Pentagon supply-chain risk designation against Anthropic, allowing the US Department of Defense to keep the company's Claude AI models out of its systems. The ruling means the department can continue blocking Anthropic while litigation continues, and the company said it is weighing its next steps.
Anthropic spokesperson Danielle Cohen said the company remains confident in its position and is considering all options, which could include asking a broader panel of the DC Circuit Court of Appeals or the US Supreme Court to review the case. The decision came on a 2-1 vote.
The majority found the department had ample support for concluding that continued integration of Claude into its information systems, by the department or its contractors, presented a national-security risk covered by statute. The judges noted that Anthropic itself acknowledges it builds restrictions into Claude that prevent the model from doing certain tasks. The majority also rejected Anthropic's due process and free speech claims, saying the government followed procedure and that the dispute amounted to standard contract negotiations. The Pentagon excluded Anthropic because the company would not agree to a contract term the department considered essential, not because of the company's views on AI regulation, the judges wrote.
Earlier this year, the Pentagon sanctioned Anthropic under two separate supply-chain laws to remove Claude from the military and other parts of the federal government by this month. Anthropic executives have said the company would not let the government use its current AI models for autonomous weapons or domestic surveillance, a stance Secretary of Defense Pete Hegseth called a significant national security risk. The two designations had to be challenged in separate courts.
A federal judge in San Francisco threw out one of the labels in March and confirmed that decision last month, but Friday's ruling leaves the other in place indefinitely, so the Pentagon's block on Anthropic can continue. Both rulings face the prospect of years of appeals. The DC panel's decision was somewhat expected: in April the same panel declined to temporarily block the designation after finding Anthropic failed to meet stringent requirements for an immediate reprieve. During a hearing before the ruling, the three judges pressed both sides and appeared divided on whether to block the designation entirely.
In the immediate aftermath of the designations, Anthropic said it lost revenue because customers worried about doing business with what it described as a government pariah. The company has not provided further updates on how the designations have affected its bottom line, though it has touted growing sales in recent months and is moving toward a potential initial public offering later this year. The Pentagon has not given detailed updates on 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 rejected, citing ethical concerns, but the companies have dismissed the protests and described supporting the US government as crucial.
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