A federal appeals court ruled Friday that President Trump and Defense Secretary Pete Hegseth may blacklist Anthropic, rejecting the company’s challenge to an order barring federal agencies from using its products and prohibiting defense contractors from doing business with it. The US Court of Appeals for the District of Columbia Circuit issued the 2-1 decision, denying Anthropic’s petitions for review. The same court had previously turned down Anthropic’s emergency motion for a stay in April.
The majority acknowledged the stakes, writing that the case poses difficult questions about military use of a powerful new technology. It described the government’s concern that overly constrained AI models could shut down unexpectedly and cause military operations to fail, and Anthropic’s concern that unconstrained models could hallucinate inappropriate targets for lethal force. The court said Trump and Hegseth must balance those competing risks and that the Secretary did not exceed his authority under the Supply Chain Security Act or the Constitution.
The two judges in the majority were both appointed by Trump and served in his first administration. Judge Gregory Katsas was previously deputy counsel to the president, and Judge Neomi Rao served in the Trump administration’s Office of Management and Budget. Judge Karen Henderson, a George H.W. Bush appointee, dissented, disputing the majority’s reading of the definition in 41 U.S.C. § 4713 and arguing the provision targets deliberate impediment or eavesdropping on covered articles in the federal supply chain.
Anthropic sued the Trump administration in March after the order was issued. The company said it disagreed with the ruling and was considering options including further review; it noted that another federal court had already found the government’s parallel designation unlawful. Commerce Secretary Howard Lutnick recently said the administration and Anthropic had repaired their relationship and were in tune.
Two courts have reviewed the blacklisting. A judge in the US District Court for the Northern District of California ruled last month that the action was illegal because Anthropic does not meet the definition of a supply-chain risk under 10 U.S.C. § 3252, which is limited to malicious actions by adversaries. That court, presided over by Judge Rita Lin, a Biden appointee, also found the blacklisting violated the First Amendment, writing that an empty invocation of national security is not a blank check to punish government critics.
The DC Circuit did not dispute the district court’s primary finding, but said that court reviewed the decision under one law while the appeals court holds exclusive jurisdiction under the more permissive 41 U.S.C. § 4713. The US designated Anthropic as a supply chain risk under both statutes. The appeals court found the use of “any person” in section 4713 shows the definition is not limited to adversaries or foreign entities, and pointed to the word “deny,” which it said applies to Anthropic preventing the US from using certain Claude features.
Anthropic alleged, and the California district court agreed, that the administration retaliated after the company refused to drop restrictions on use of its products for lethal autonomous warfare and mass surveillance of Americans. The appeals court noted that Anthropic encodes restrictions into Claude that have stopped the model from performing tasks requested by government users, and that a dispute arose over whether contractual prohibitions barred use of Claude in an ongoing overseas military operation. Anthropic may seek en banc review or petition the Supreme Court.
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