Judge rules Trump administration's blacklisting of Anthropic was illegal

A federal judge in California has ruled that the Trump administration acted unlawfully when it blacklisted the artificial intelligence company Anthropic as a national security and supply-chain risk. The decision, issued on August 27, is a significant legal defeat for the Pentagon in a dispute over how the military may use commercial AI models.

The ruling

U.S. District Judge Rita Lin found that the administration's measures amounted to "unlawful retaliation" in violation of the First Amendment, and that Anthropic was denied due process under the Fifth Amendment. In a 59-page order she wrote: "The empty invocation of national security is not a blank check to punish and retaliate against government critics." She added that "though the Department of War is undisputedly free to select the AI vendor of its choice, the evidence demonstrates that the broad measures imposed on Anthropic were illegal and baseless." The court also held that the Defense Department violated the Administrative Procedure Act and formally set aside the directive requiring other Pentagon contractors to stop doing business with Anthropic. Lin noted that the Pentagon kept working with the company even after the designation — behaviour, she wrote, that is "not consistent with a genuine fear that Anthropic is a saboteur who would poison its software to harm national security".

The dispute behind the case

The conflict escalated earlier this year after Anthropic and the Pentagon clashed over military use of the company's models. The Defense Department sought access for "all lawful purposes", including the most sensitive military and intelligence applications; Anthropic insisted that two areas stay off-limits: mass surveillance of Americans and fully autonomous weapons. The standoff led to the supply-chain risk designation, and the company sued the government in March, alleging that directives and public criticism by administration officials violated its free speech and due process rights. Judge Lin had already paused the label in March.

Reaction and next steps

Anthropic welcomed the outcome: "We welcome the court's ruling that this supply chain risk designation was unlawful," a spokesperson said, adding that the company remains focused on working productively with the government to harness AI for national security. The Pentagon did not immediately respond to a request for comment. The government is expected to appeal, and a second Anthropic lawsuit, over a different Pentagon designation, is still pending in the D.C. Circuit.

The "supply chain risk" label has in the past been applied to institutions tied to foreign adversaries such as China, Iran, North Korea and Russia, which makes its use against a leading American AI developer unusual.