The D.C. Circuit Court of Appeals just handed Anthropic a loss. a federal court has upheld Anthropic's 'supply chain risk' designation. A three-judge panel rejected the company's request to pause a government designation that labels it a supply chain risk, keeping in place a rule that blocks Pentagon contractors from using Anthropic's AI models. Defense contractors can't touch Claude, at least for now.
This mess started in February when Anthropic CEO Dario Amodei told Defense Secretary Pete Hegseth the company wouldn't allow Claude to power autonomous weapons or mass surveillance of Americans. The Trump administration responded by slapping Anthropic with a national security risk label. That's a designation the government has never before applied to an American company.
The appeals court panel, which per court records included Trump appointees Gregory Katsas and Neomi Rao, ruled that the government's national security concerns outweighed financial harm to Anthropic. The judges acknowledged Anthropic would "likely suffer some irreparable harm" but said the "equitable balance" favored the government.
There's a strange legal split at play. A federal judge in California temporarily blocked the Pentagon's supply chain risk label last month, as previously reported. But due to how U.S. law works, Anthropic had to also challenge the designation at the D.C. Circuit. That California win now looks a lot less comforting.
Competitors are already circling. OpenAI has been courting defense contracts, including a Defense Innovation Unit partnership for GPT-4, per public procurement records. Microsoft holds the massive Joint Warfighting Cloud Capability contract and can steer contractors toward Azure OpenAI Service. Meta's Llama models, with their permissive licensing on military use, are getting picked up by defense integrators like Palantir and Scale AI. The Pentagon's blacklist is effectively consolidating the defense AI market around companies willing to play by government rules.
An Anthropic spokesperson told Agent Wars the company remains "confident the courts will ultimately agree that these supply chain designations were unlawful."