Appeals Court Rules Against Anthropic in Pentagon Supply-Chain Dispute, Clashing With Earlier Lower Court Ruling
On Wednesday, a federal appeals court based in Washington, D.C. issued a ruling holding that Anthropic failed to meet the strict criteria required to temporarily suspend the supply-chain-risk designation the Pentagon placed on the AI firm.
The ruling directly contradicts a preliminary decision issued last month by a lower-court judge in San Francisco, and as of Wednesday, there was no clear path forward for resolving these clashing preliminary judgments. The conflicting outcomes stem from the fact that the U.S. government placed sanctions on Anthropic under two separate, similarly impactful supply-chain security laws, with each jurisdiction only reviewing one of the two designations. Anthropic has noted it is the first U.S. company ever to receive such designations under these laws, which are historically reserved for penalizing foreign entities deemed to pose national security risks.
In their opinion for the unprecedented case, the three-judge appellate panel wrote that granting Anthropic’s request to pause the designation "would force the United States military to prolong its dealings with an unwanted vendor of critical AI services in the middle of a significant ongoing military conflict." The panel acknowledged that the continuing designation could cause financial harm to Anthropic, but ruled that the court was unwilling to risk "a substantial judicial imposition on military operations" or "lightly override" the military’s own national security assessments.
In sharp contrast, the San Francisco lower-court judge concluded the Department of Defense (DoD) very likely acted in bad faith when targeting Anthropic, driven by frustration over the AI company’s proposed limits on government use of its technology, as well as Anthropic’s public criticism of attempts to bypass those restrictions. Last month, that judge ordered the supply-chain-risk label be stripped from Anthropic, and the Trump administration complied, restoring access to Anthropic’s AI tools for all Pentagon and federal government users.
In a statement following Wednesday’s ruling, Anthropic spokesperson Danielle Cohen said the company appreciates that the D.C. court "recognized these issues need to be resolved quickly," and remains confident "the courts will ultimately agree that these supply chain designations were unlawful."
The DoD did not immediately respond to a request for comment on the new ruling, but acting U.S. Attorney General Todd Blanche released a public statement on X celebrating the decision. "Today’s DC Circuit stay allowing the government to designate Anthropic as a supply-chain risk is a resounding victory for military readiness," Blanche wrote. "Our position has been clear from the start—our military needs full access to Anthropic’s models if its technology is integrated into our sensitive systems. Military authority and operational control belong to the Commander-in-Chief and Department of War, not a tech company." (Under the Trump administration, the Pentagon was formally renamed the Department of War.)
The dual lawsuits mark a key test of how much authority the executive branch holds over the operations of private technology companies. The high-stakes clash between Anthropic and the Trump administration is unfolding at a time when the Department of War is rapidly integrating AI into its ongoing military campaign against Iran. Anthropic has argued that it is being illegally penalized for its public stance that its flagship AI model Claude is not sufficiently accurate to be used for certain sensitive military operations, including carrying out lethal drone strikes without direct human oversight.
Multiple legal experts specializing in government contracting and corporate rights told WIRED that Anthropic holds a strong legal case against the federal government, but courts have a long history of deferring to the White House on national security-related disputes. A number of AI researchers have also warned that the DoD’s actions against Anthropic create a chilling effect on open professional debate about the real capabilities and limitations of AI systems built for military use.
In court filings, Anthropic has stated that the designation has already caused it to lose significant commercial business, as government lawyers confirm the label blocks the Department of War and its private contractors from using Claude as part of any military project. Analysts also note that as long as the Trump administration remains in power, Anthropic is unlikely to restore the major foothold it once held in the U.S. federal government.
Final rulings in both of Anthropic’s lawsuits are still months away, with the D.C. court scheduled to hear full oral arguments in the case on May 19.
Both parties have released minimal public details about exactly how the Department of War used Claude, or how much progress the military has made in transitioning personnel to alternative AI tools from providers including Google DeepMind, OpenAI, and other vendors. The military has stated it has already taken steps to block Anthropic from intentionally sabotaging its AI tools during any transition period.
Update 4/8/26 7:27 EDT: This story has been updated to include a statement from acting Attorney General Todd Blanche.
