Appeals court upholds Pentagon's supply chain risk label for Anthropic

A federal appeals court in Washington, D.C., on Friday upheld the Pentagon's decision to bar AI company Anthropic from military contracts. The court ruled 2-1 that the Department of Defense was right to classify Anthropic as a national security supply chain risk. CNBC reported the ruling first.

What the court decided

Judge Gregory Katsas wrote the majority opinion for the U.S. Court of Appeals for the District of Columbia, joined by Judge Neomi Rao. Judge Karen LeCraft Henderson dissented. Katsas wrote that 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." He added that the president and the defense secretary must balance the competing risks, and that Secretary Pete Hegseth did not exceed his authority under the Supply Chain Security Act or the Constitution.

The panel delayed the ruling from taking immediate effect, giving Anthropic time to ask for a rehearing, seek an en banc review before all the circuit's judges, or take the case to the Supreme Court.

How the dispute began

Anthropic signed a $200 million contract with the Pentagon in July 2025. Talks over deploying its Claude models on the department's GenAI.mil platform collapsed that September. The Pentagon wanted access for all lawful purposes, while Anthropic sought assurances that its technology would not be used for fully autonomous weapons or domestic mass surveillance. Hegseth accused the company of trying to "seize veto power over the operational decisions of the United States military." In March, the Pentagon labeled Anthropic a supply chain risk, blocking the military and its contractors from using the company's models.

What it means for Anthropic

"We respectfully disagree with the court's decision," an Anthropic spokesperson said, adding that the company remains confident in its position and is considering all options, including further review. A parallel designation under a different law was blocked by a federal judge in San Francisco in late August. According to Anthropic, the designation has cost the company billions and is hurting its planned IPO. U.S. intelligence agencies remain heavy users of Anthropic's models, and how that squares with a supply chain risk label remains an open question. Parts of the tech industry and former military officials have backed Anthropic, while the Trump administration appears to view the company as "left-leaning" and "woke"; President Trump has said as much himself.