Appeals court upholds Pentagon blacklisting of Anthropic over Claude safeguards

September 25, 2026 at 09:19 PM2 min

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A federal appeals court ruled Friday that the Defense Department may exclude Anthropic from all Pentagon contracts, upholding the AI firm's designation as a supply chain risk. The 2-1 decision by the D.C. Circuit found the department had ample support for its conclusion that Claude's encoded restrictions pose a national-security risk. Anthropic has said the blacklisting will cost it hundreds of millions of dollars in revenue and cause reputational stigma.

Key Facts

The D.C. Circuit Court of Appeals ruled 2-1 on Friday that the Defense Department had good reason to designate Anthropic as a supply chain risk.
The conflict began in February when Anthropic refused Pentagon Secretary Pete Hegseth's demand to remove restrictions on Claude's use for fully autonomous lethal weapons and mass domestic surveillance.
The supply chain risk designation, made in March, cancelled Anthropic's military contracts and barred other Defense Department contractors from using its technology.
Anthropic has said the blacklisting has cost it billions of dollars in lost business and damaged its reputation ahead of a highly anticipated initial public offering.

The Court's Ruling

The D.C. Circuit Court of Appeals ruled 2-1 that the Defense Department had good reason to conclude that Anthropic's AI products pose a supply chain risk to the department and its contractors. The court wrote that the department had ample support for its conclusion that the continued integration of Claude into the department's information systems presented a statutorily covered national-security risk. The ruling noted that Anthropic admits it encodes restrictions into Claude that prevent the model from performing tasks the company wishes to prevent. The decision expands the executive branch's authority to designate US businesses as national security risks.

Anthropic's Safeguards

Anthropic has said it will not allow its products to be used for autonomous weapons or mass domestic surveillance. The conflict began in February when Anthropic refused Pentagon Secretary Pete Hegseth's demand to remove restrictions on the use of Claude for fully autonomous lethal weapons and mass domestic surveillance of Americans. The supply chain risk designation, made in March, cancelled Anthropic's military contracts and barred other Defense Department contractors from using its technology.

Financial and Reputational Impact

Anthropic has said the blacklisting will cause it significant reputational stigma and cost it hundreds of millions of dollars in revenue. The company has also said the designation has cost it billions of dollars in lost business and damaged its reputation ahead of a highly anticipated initial public offering. The designation against Anthropic marked a highly unusual application of the authority against a US company.