Court rules Pentagon’s ‘Supply-Chain Risk’ label on Anthropic was illegal

A U.S. federal judge has ruled that the Pentagon acted unlawfully when it designated artificial intelligence company Anthropic as a “supply-chain risk,” handing the Claude maker a major legal victory in its escalating dispute with the Trump administration.

U.S. District Judge Rita Lin ruled Thursday that the government’s decision violated Anthropic’s constitutional rights and was not supported by a legitimate national security justification. The 59-page ruling found that the Pentagon’s actions amounted to unlawful retaliation against the company.

Dispute Over AI Safety Restrictions

The conflict began after Anthropic refused to give the Pentagon unrestricted access to its Claude AI models. The company maintained restrictions on the use of its technology for mass surveillance of Americans and autonomous weapons without appropriate human oversight.

The disagreement escalated in February, when Defense Secretary Pete Hegseth designated Anthropic as a supply-chain risk. President Donald Trump also directed federal agencies to stop using the company's technology.

The designation carried potentially serious commercial consequences. The Pentagon's move effectively threatened to cut Anthropic off from federal contracts and could have forced government contractors to stop working with the company. Anthropic argued that the decision could put billions of dollars in business at risk.

Judge Finds Constitutional Violations

Judge Lin concluded that the government’s actions amounted to retaliation for Anthropic’s position on how its technology should be used. The court found violations of both the First Amendment and the Fifth Amendment.

The First Amendment finding is particularly significant because it suggests the government punished Anthropic for expressing objections to the Pentagon’s proposed uses of its AI systems. The court also found that Anthropic was denied the procedural protections required before such a damaging designation could be imposed.

Lin further described the Pentagon's designation as arbitrary and capricious, concluding that the government had not established a valid basis for treating Anthropic as a national security supply-chain threat.

A Significant Win for Anthropic

Anthropic welcomed the ruling, saying it remained committed to working with the U.S. government on national security while maintaining its position on responsible AI deployment.

The decision represents a significant setback for the Pentagon as the U.S. government increasingly turns to private AI companies for military and national security applications. It also establishes an important precedent for how far the government can go when dealing with technology companies that impose restrictions on the use of their systems.

The government is expected to challenge the ruling, meaning the legal battle between Anthropic and the Pentagon may not be over. For now, however, the decision gives Anthropic a powerful legal victory in one of the most consequential disputes over AI, national security and corporate rights.