A federal appeals court in Washington, D.C., has upheld the Pentagon's blacklisting of AI startup Anthropic as a national security supply chain risk. The 2-1 decision by the D.C. Circuit validates Defense Secretary Pete Hegseth's designation, which was triggered by Anthropic's refusal to remove safety guardrails preventing Claude from being used in autonomous weapons or mass surveillance. The ruling conflicts with an August decision by a federal judge in San Francisco who blocked a parallel designation, setting up a complex legal battle as Anthropic prepares for a potential initial public offering.
The D.C. Circuit ruling and opinions
- ▪Judge Karen LeCraft Henderson dissented from the D.C. Circuit ruling on Anthropic's blacklisting, writing that 41 U.S.C. Section 4713 does not treat a contractor's upfront enforcement of restrictions as a supply chain risk permitting blacklisting
- ▪Judge Gregory Katsas, joined by Judge Neomi Rao, wrote the majority opinion for the D.C. Circuit, stating that the Department of Defense had ample support to conclude that integrating Claude into the department's information systems presented a national security risk
- ▪On September 25, 2026, the U.S. Court of Appeals for the District of Columbia Circuit ruled 2-1 that the Pentagon and Department of Defense's blacklisting of Anthropic's Claude was not arbitrary, unauthorized, or unconstitutional.
Dispute over AI safety restrictions
- ▪A dispute between Anthropic and the Pentagon began after negotiations collapsed over deploying Claude on the Pentagon's GenAI.mil platform, with Anthropic refusing to allow its AI models to be used for autonomous weapons or domestic mass surveillance
- ▪Anthropic denied that its safety restrictions endangered American lives, stating that AI is not yet reliable enough to be safely used in autonomous weapons.
- ▪Defense Secretary Pete Hegseth argued that Anthropic's safety restrictions could compromise military operations by causing overly constrained AI models to shut down unexpectedly during critical missions.
Impact of the Pentagon designation
- ▪The Pentagon's March 2026 supply chain risk designation of Anthropic prevents the U.S. military from using Anthropic's Claude AI models and blocks defense contractors from using them in their work with the agency
- ▪Anthropic stated that the Pentagon's March 2026 designation of it as a supply chain risk has cost the company billions of dollars in lost business and damaged its reputation ahead of a planned initial public offering
Legal basis under Section 4713
- ▪Under 41 U.S.C. Section 4713, supply chain risk is defined as the risk that any person may manipulate or disrupt covered technology products, without requiring a showing of bad motive or adversarial intent.
- ▪The D.C. Circuit appeals court reviewed and upheld the blacklisting under 41 U.S.C. Section 4713, which provides a broader definition of supply chain risk than the statute reviewed by the California district court.
San Francisco Court ruling
- ▪U.S. District Judge Rita Lin also blocked President Donald Trump's government-wide ban on Anthropic and Defense Secretary Pete Hegseth's order barring military contractors from doing business with Anthropic
- ▪U.S. District Judge Rita Lin in San Francisco ruled in August 2026 that the Pentagon's parallel designation under a different law was illegal, finding the administration had unlawfully retaliated against Anthropic.
Appeals court rulings
- ▪The D.C. Circuit appeals court delayed its decision from taking immediate effect to allow Anthropic time to petition for a rehearing, an en banc review, or an appeal to the U.S. Supreme Court.
- ▪In April 2026, the same D.C. Circuit appeals court panel declined to temporarily block the supply-chain-risk designation, finding that Anthropic failed to meet stringent requirements for an immediate reprieve.
Debatable claims
- ▪The executive branch has the authority to define national security risks in procurement without judicial second-guessing
- ▪A contractor's enforcement of safety restrictions constitutes a national security supply chain risk
- ▪The Pentagon's blacklisting of Anthropic was unlawful retaliation for the company's ethical views
- ▪The Pentagon should blacklist technology companies that refuse to allow their AI to be used for autonomous weapons
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