Anthropic lost in the federal appeals court in Washington on Friday. The panel ruled 2-1 that the Department of Defense was allowed to designate the company a supply chain risk. The ban stays: the US military cannot use Claude, and defense contractors cannot use the models in their work for the department.
Anthropic had argued the designation was arbitrary, unauthorized and unconstitutional. Judge Gregory Katsas disagreed. The department had “ample support” for its conclusion that keeping Claude in its information systems presented a statutorily covered national-security risk. Neomi Rao joined him; both were appointed by Donald Trump. Karen LeCraft Henderson, appointed by George H. W. Bush, dissented.
How it got here
The department labelled Anthropic a supply chain risk in March, after talks about deploying Claude in the military collapsed. The department wanted unrestricted access for all lawful purposes. Anthropic wanted assurances that the models would not be used for fully autonomous weapons or for domestic mass surveillance. Defense Secretary Pete Hegseth then accused the company of trying to seize veto power over military decisions. Before that, Anthropic was an early partner across several US agencies and had signed a $200 million contract with the Pentagon in July 2025. The Pentagon’s GenAI.mil portal then launched in early September without Claude.
Katsas cited Hegseth’s worry that “overly constrained” models might shut down unexpectedly or be manipulated. Anthropic has denied that. For the court it did not matter: “In our Republic, it is the President and the Secretary of War who must determine how best to balance the competing risks.”
Two courts, two designations
The department leaned on two separate designations, and each had to be litigated on its own. A federal judge in San Francisco declared one of them illegal in August. The appeals court has now upheld the other.
“We respectfully disagree with the court’s decision,” an Anthropic spokesperson said. “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.” The panel is holding its decision back from taking immediate effect so Anthropic can ask for a rehearing, either before the same three judges or before the full court. The Supreme Court is also still an option.
This stopped being a contract dispute a while ago
What began in September 2025 as a negotiation over deployment terms is now a political fight. Trump has attacked Dario Amodei publicly several times in recent months, again on Truth Social on Monday. Amodei was not invited to Thursday’s state dinner for Xi Jinping. Read against that, Katsas’s line about the President and the Secretary sounds like confirmation of what Anthropic feared from the start: a company that wants to set the terms on which its models are used is not negotiating with an agency, it is negotiating with an administration.
Sources: