The U.S. Court of Appeals for the D.C. Circuit ruled 2-1 on September 25 to uphold the Defense Department's designation of Anthropic as a "supply chain risk." With the ruling in effect, the Pentagon can continue removing Claude models from its own systems and bar the military and defense contractors from using Anthropic's products on Defense Department-related work.
The majority opinion was written by Judges Gregory Katsas and Neomi Rao, both Trump appointees; the dissent came from Judge Karen LeCraft Henderson, appointed by George H.W. Bush. Anthropic had argued the Pentagon's ban was arbitrary, exceeded its authority, and was unconstitutional — the majority rejected all three arguments.
The majority looked at what Anthropic did, not why
Katsas wrote in the opinion:
"The Department reasonably feared that Anthropic might manipulate Claude's design to prevent it from performing national-security functions."
The majority also stressed that the question turns on what Anthropic did, not why it did it. In this case, Anthropic's insistence on contract terms banning Claude from use in lethal autonomous weapons and domestic mass surveillance, and its refusal to loosen them, was itself enough to constitute a risk in the Defense Department's eyes.
Henderson's dissent starts from legislative intent. She argued the 2018 supply-chain security law was meant to target hostile states infiltrating federal systems through suppliers, and that applying it to a contractor that openly and candidly enforces its own usage restrictions goes beyond what lawmakers intended.
Pentagon spokesperson Sean Parnell said the ruling "completely validates the Department's position." An Anthropic spokesperson said the company would "respectfully disagree," adding that it remains confident in its position and is weighing all options, including further review. The company did not say whether it would seek en banc rehearing or appeal to the Supreme Court.
Two lawsuits, two labels
The dispute began in February. President Trump and Defense Secretary Hegseth accused Anthropic of endangering national security, and the Pentagon subsequently issued a supply-chain risk designation against the company. Anthropic CEO Dario Amodei did not back down, citing concerns that the company's products could be used for mass surveillance or autonomous armed drones.
The Defense Department issued two separate designations, and Anthropic sued in two different courts over them.
| U.S. District Court, San Francisco | D.C. Circuit Court of Appeals | |
|---|---|---|
| What was reviewed | A separate, parallel designation | The second designation, issued under the 2018 supply-chain security law |
| Outcome | Ruled against the Pentagon in August | Upheld 2-1 on September 25 |
| What the court focused on | Pentagon's motive: punishing Anthropic for criticizing its AI policy | Anthropic's conduct: usage restrictions that could affect national-security functions |
The San Francisco ruling ran 59 pages, with the judge finding the Pentagon's move amounted to punishing criticism — this outlet reported on it at the time. Observers noted then that Anthropic's hope of shedding the label entirely still depended on how the Washington case turned out. Now that Washington has ruled, it went the other way.
The two rulings don't directly conflict. San Francisco examined motive, Washington examined conduct, and the two cases rest on different legal grounds. In its response, Anthropic specifically noted that "another federal court has already found the government's parallel designation unlawful," suggesting it plans to use the split outcome as leverage going forward.
For Anthropic's business, the impact is confined to the U.S. defense establishment: the military itself can't use its products, and defense contractors can't use them on Defense Department work either. Commercial and overseas customers aren't affected by the designation. Whether other government buyers might point to a "supply-chain risk label upheld by an appeals court" in an ongoing lawsuit is a separate question, and no agency has commented on that so far.
Sources: CNBC, Associated Press, The Next Web, CocoLoop; details on the panel's composition, the majority and dissenting opinions, and both parties' statements follow court and news reporting.