DC Circuit Upholds Pentagon's Supply-Chain Risk Label on Anthropic

Washington, D.C. — A federal appeals court on Friday refused to overturn a Pentagon designation branding Anthropic a supply-chain risk, leaving in place one of two sanctions that bar the company's Claude AI models from military and federal computer systems, according to WIRED.

The US Court of Appeals for the DC Circuit ruled 2-1, with the majority declining to second-guess the US Department of Defense's national-security judgment, WIRED reported.

What Did The Court Rule Friday?

A divided three-judge panel sided with the Trump administration, rejecting Anthropic's argument that the designation violated the company's rights. "The department had ample support for its conclusion that the continued integration of Claude into the department's information systems, by the department or its contractors, presented a statutorily covered national-security risk," the majority wrote, according to WIRED. The opinion also noted, "As Anthropic admits, the company encodes restrictions into Claude that prevent the model from performing tasks that Anthropic wishes to prevent."

Why Did The Pentagon Label Anthropic A Risk?

Earlier this year the Pentagon sanctioned Anthropic under two separate supply-chain laws, ordering Claude removed from military and other federal systems by this month, WIRED reported. Anthropic executives said the company would not let the government deploy its current models to support autonomous weapons or domestic surveillance. Defense Secretary Pete Hegseth called that stance a significant national security risk, according to the outlet.

How Do The Two Supply-Chain Cases Differ?

Because the designations fell under separate statutes, they had to be challenged in different courts, WIRED reported. A federal judge in San Francisco tossed out one of the two labels in March and reaffirmed that ruling last month. Friday's DC Circuit decision means the second label stays in place indefinitely, so the Pentagon's blocking of Anthropic continues. Both cases face years of further appeals, according to WIRED.

By the numbers: The DC Circuit ruled 2-1 to uphold the designation. Two separate supply-chain statutes produced two separate rulings — one vacated in March, one upheld in September.

What Options Does Anthropic Have Next?

Anthropic spokesperson Danielle Cohen said the company remains confident in its position and is weighing its options, which could include seeking review by a full panel of the DC Circuit or petitioning the US Supreme Court, WIRED reported. Anthropic has not disclosed further financial impact from the designations beyond earlier statements that it lost revenue as customers grew wary of doing business with a government-sanctioned firm. The company has since touted growing sales and is moving toward a potential initial public offering later this year, according to WIRED.

How Is The Pentagon Replacing Claude?

The Pentagon has not detailed its progress in substituting Claude with rivals such as SpaceX's Grok, Google's Gemini or OpenAI's GPT models, WIRED reported. Some employees at Google and OpenAI have objected internally to their companies pursuing military contracts that Anthropic declined, citing ethical concerns, though both firms have said supporting the US government is essential, according to the outlet. The same DC Circuit panel had signaled its direction in April, when it declined to temporarily block the designation, finding Anthropic had not met the "stringent requirements" for immediate relief, WIRED reported.

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