A United States appeals court has upheld the Defense Department’s decision to exclude artificial intelligence startup Anthropic from its military supply chain following a dispute over autonomous weapons and surveillance safeguards. The ruling, issued on Friday, creates a potential legal conflict with a separate federal court decision handed down in California last month.
Appeals Court Upholds Pentagon Procurement Restrictions
The federal appeals court ruled in favor of the Department of Defense, maintaining a supply chain risk designation that blocks Anthropic from defense contracts and bars other military contractors from utilizing its technology. According to court records, the conflict began in February when Anthropic refused Defense Secretary Pete Hegseth’s demand to remove safety restrictions on its Claude AI model regarding fully autonomous lethal weapons and mass domestic surveillance of Americans.
The Pentagon formally designated Anthropic as a supply chain risk in March, a move that canceled existing military agreements. Anthropic stated that the blacklisting has cost the company billions of dollars in lost business and damaged its reputation ahead of an anticipated initial public offering. The designation marks a highly unusual application of supply chain risk authority against an American technology firm.
Legal Clash Over Administration Actions
Friday’s appeals court decision runs counter to a ruling issued last month by San Francisco federal Judge Rita Lin, who found that the broader ban imposed by the administration against Anthropic was illegal. Judge Lin characterized the Defense Department’s move as arbitrary and capricious, ruling that the designation violated the First Amendment and that the invocation of national security was insufficient to penalize government critics.
Despite the California ruling, the Pentagon’s procurement-based designation remains in effect, leaving the company facing conflicting federal judicial opinions. An Anthropic spokesperson told US media that the company respectfully disagrees with the appeals court decision, notes that another federal court found the parallel designation unlawful, and is considering further legal review.
Commercial Impact and Military Deployment History
Before the supply chain designation, the military utilized Claude across classified and sensitive operational systems, including the January operation that captured and deposed Venezuelan leader Nicolas Maduro. The company has faced heightened scrutiny at the White House due to CEO Dario Amodei’s public warnings regarding artificial intelligence safety risks, which President Donald Trump dismissed as a hoax.
Anthropic maintains that its safety guardrails are essential to prevent technology from undermining democratic values. The company continues to manage ongoing litigation, including an active case in Washington, DC, while proceeding toward its planned public stock offering.
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