Appeals court upholds Pentagon’s supply-chain-risk designation of Anthropic

A US appeals court upheld on Friday the Pentagon’s decision to exclude Anthropic from its supply chain⁷. A federal court found that the Pentagon can label Anthropic a supply chain risk^1,9. The judges ruled that the Pentagon had “ample support” for its decision to designate the company that way⁴.

The decision came from the DC Circuit, by a vote of two to one, and upheld the Pentagon’s designation as well as the bar on military and defence contractors using Anthropic’s models³. Coverage described the outcome as judges upholding Anthropic’s Pentagon blacklist⁴. A federal appeals court upheld the supply chain risk designation, allowing the Pentagon to exclude Anthropic from defence work⁵. A US court sided with the Pentagon in the ban on Anthropic’s AI models².

How the dispute began

The conflict began in February, when Defense Secretary Pete Hegseth demanded that Anthropic change its terms². Anthropic’s military contracts were then cancelled and other Pentagon users were barred from its models². The Pentagon designated Anthropic a supply chain risk in early March, after Hegseth’s demand⁸.

The Department of Defense sanctioned Anthropic under two separate supply-chain risk laws, aiming to strip Claude out of military systems¹⁰. Hegseth accused Anthropic of endangering national security⁹. The ruling was the latest twist in Anthropic’s dispute with the Pentagon¹. The department’s stated objection was to the company’s guardrails on military use².

What to watch

Emil Michael celebrated the decision on X, saying that “the weight of justice has shattered Anthropic’s arguments”⁶. Accounts differ on his title: one identifies him as Deputy Secretary of Defense⁶, another as Under Secretary of Defense⁷.

The ruling lands ahead of an anticipated Anthropic initial public offering⁵. Its reach is the open question. As described, the order lets the Pentagon exclude the company from Defense Department contracts and military systems, with two separate statutory bases behind the designation^3,10. The case also sits inside a wider pattern of courts being asked to weigh the administration’s national security claims⁸. For investors in AI infrastructure and defence software, the precedent is that a single department can foreclose a vendor without a contracting failure, and that an appellate court will not second-guess it where the record is judged adequate^4,5. The two statutory bases matter here, because a designation resting on more than one law is harder to unwind by curing a single defect¹⁰. The bar also extends to defence contractors, not only to the department itself³.