A US appeals court in Washington, DC has upheld the Pentagon's authority to designate Anthropic as a supply chain risk, preventing the company's Claude AI models from being used by the military and federal government. The 2-1 ruling rejected Anthropic's legal challenges, including claims that its due process and free speech rights had been violated. The designation stems from Anthropic's refusal to allow Claude to support autonomous weapons systems or domestic surveillance—a stance the Department of Defense deemed a significant national security risk. Anthropic says it remains confident in its position and is considering further appeals, potentially to the Supreme Court.

The decision upholds one of two separate supply chain designations issued earlier this year, though a federal judge in San Francisco previously struck down the other. The Pentagon had ordered the removal of Claude from its systems by this month. Anthropic executives stated they were unwilling to compromise on restrictions built into Claude to prevent misuse, even for government contracts. The ruling allows the Pentagon to continue replacing Claude with alternatives including SpaceX's Grok, Google's Gemini, and OpenAI's GPT models. Although Anthropic reported lost revenue immediately after the designations, the company has claimed growing sales in recent months and is preparing for a potential initial public offering later this year.