Federal appeals court 2-1 upholds Pentagon supply chain risk designation against Anthropic
The D.C. Circuit Court of Appeals ruled 2-1 on September 26 to uphold the Pentagon’s March supply chain risk designation against Anthropic; Anthropic says it will seek en banc review.
On September 26, the U.S. Court of Appeals for the District of Columbia Circuit ruled 2-1 to uphold the Department of Defense’s March supply-chain-risk designation against Anthropic, leaving the lab excluded from Pentagon procurement and barring defense contractors from using Claude in agency work. The majority opinion was written by Judge Gregory Katsas, joined by Judge Neomi Rao; Judge Karen LeCraft Henderson dissented.
The dispute began when negotiations over how Claude could be deployed in military systems collapsed. Anthropic signed a $200 million contract with the Pentagon in July 2025, but during September planning for the GenAI.mil platform the DOD demanded unfettered access for any lawful purpose. Anthropic refused to relax contractual prohibitions on fully autonomous lethal weapons and mass domestic surveillance. Defense Secretary Pete Hegseth then designated Anthropic as a supply-chain risk, and Anthropic sued in parallel in the D.C. Circuit and in the Northern District of California.
The majority found the Pentagon had ample support to conclude that Claude’s built-in restrictions and the unresolved contract dispute could make it unreliable in critical military operations, satisfying the statutory meaning of supply-chain risk. In her dissent, Henderson wrote that the statute does not treat a contractor’s honest and upfront enforcement of restrictions as the kind of conduct that permits blacklisting. In a separate related case last month, U.S. District Judge Rita Lin in San Francisco found a parallel Pentagon designation unlawful, and that ruling remains in effect. Anthropic said it "respectfully disagrees" with the appellate decision and will consider en banc review or Supreme Court appeal.