U.S. appeals court upholds Pentagon designation of Anthropic as supply chain risk

A federal appeals court in Washington, D.C., on Friday upheld the Pentagon’s blacklisting of Anthropic, a blow to the artificial intelligence company in its months-long battle with the Trump administration. 

In a 2-1 decision, Circuit Judge Gregory Katsas and Circuit Judge Neomi Rao rejected Anthropic’s argument that the Department of Defense’s ban on its Claude models was arbitrary, unauthorized and unconstitutional. Circuit Judge Karen LeCraft Henderson dissented.

“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,” Katsas wrote in the opinion for the court.

In March, the DOD labeled Anthropic a supply chain risk, meaning the company purportedly threatened U.S. national security, after negotiations about how the military could use its Claude AI models spiraled out of control. The designation prevents the U.S. military from using Anthropic’s models and blocks defense contractors from using them in their work with the agency.

Anthropic sued the Trump administration in San Francisco and Washington, D.C., an effort to reverse its blacklisting. The DOD relied on two distinct designations to justify its supply chain risk action, which meant they had to be litigated in two separate courts. 

A San Francisco federal judge ruled last month that one designation was illegal, but the D.C. appeals court upheld the second designation on Friday.

“We respectfully disagree with the court’s decision,” an Anthropic spokesperson told CNBC in a statement. “Another federal court has already held the government’s parallel designation unlawful. We remain confident in our position and are considering all options, including further review.”

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