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

A federal appeals court panel in Washington, D.C., on Friday upheld the Pentagon's blacklisting of Anthropic, rejecting the artificial intelligence company's challenge to a designation that bars the U.S. military from using its Claude models. The 2-1 decision is the latest stage of a months-long fight between Anthropic and the Trump administration.

What the court ruled

The U.S. Court of Appeals for the District of Columbia rejected Anthropic's argument that the Department of Defense's ban was arbitrary, unauthorized and unconstitutional. Judge Gregory Katsas wrote the majority opinion, which Judge Neomi Rao joined; both were appointed by President Donald Trump. Judge Karen LeCraft Henderson, appointed by former President George H.W. Bush, 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.

How the dispute began

Anthropic was an early partner across many U.S. agencies, including the DOD, and signed a $200 million contract with the Pentagon in July 2025. Talks over deploying Claude on the department's GenAI.mil platform collapsed that September: the DOD wanted unfettered access to Anthropic's models for all lawful purposes, while the company sought assurances that its technology would not be used for fully autonomous weapons or domestic mass surveillance. Defense Secretary Pete Hegseth accused Anthropic of trying to "seize veto power over the operational decisions of the United States military."

In March, the DOD labeled Anthropic a supply chain risk, saying the company purportedly threatened U.S. national security. 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.

What happens next

Anthropic sued the Trump administration in U.S. District Court in San Francisco and in the D.C. Circuit Appeals Court, because the DOD relied on two distinct designations and the challenge had to be litigated in two separate courts. A San Francisco federal judge ruled last month that one designation was illegal; Friday's ruling upheld the second.

"We respectfully disagree with the court's decision," an Anthropic spokesperson told CNBC. "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 appellate panel delayed the decision from taking immediate effect, giving Anthropic time to petition the same panel for a rehearing or to seek an en banc rehearing by all judges on the D.C. Circuit. The company could also ask the Supreme Court to take the case.