US court backs Pentagon's decision to exclude Anthropic over Claude AI restrictions

A US appeals court on Friday upheld the Pentagon's decision to exclude AI startup Anthropic from its supply chain after the company declined to remove certain safeguards from its Claude artificial intelligence model. The dispute started in February after Anthropic rejected a demand from Pentagon Secretary Pete Hegseth to lift restrictions on Claude's use in fully autonomous lethal weapons and mass domestic surveillance of Americans. The Pentagon formally designated Anthropic as a supply chain risk in March. The move resulted in the cancellation of the company's military contracts and prevented other Pentagon contractors from using its technology. The US military had been using Claude across a range of classified and sensitive systems.

Anthropic's concerns over military use

According to the court's decision, an Anthropic executive raised concerns about the use of Claude by Pentagon contractor Palantir during a military operation that captured Venezuelan President Nicolas Maduro on January 3. The objection led to alarm and raised material doubts as to whether they would cause their software to stop working or cause some other disastrous action that would put our warfighters' lives in danger, Under Secretary of Defense Emil Michael said, according to the court opinion.

Anthropic has maintained that it cannot alter its AI models after they have been delivered to the military. However, the Washington appeals court found that Anthropic determines the behaviour of each new version of its models, while the military must continue updating its systems to use the company's latest offerings. Judge Gregory Katsas, writing for two of the three appellate judges, said in our Republic, it is the President and the Secretary of War who must determine how best to balance risks. The ruling leaves the Pentagon's supply-chain designation in place.

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Pentagon turns to OpenAI, xAI, Google and Microsoft

The decision against Anthropic represented an unusual use of government procurement authority against a major US technology company. Following the dispute, the Pentagon turned to competing AI companies. OpenAI, the company behind ChatGPT, signed an agreement with the Pentagon on the same day as Anthropic's ban. Elon Musk's xAI, which develops Grok, signed an agreement in February, while Google and Microsoft followed several months later.

The development has placed Anthropic in a difficult position in Washington despite the company's prominent role in the rapidly expanding AI industry. Anthropic, which has been valued at nearly $1 trillion, is also preparing for a major initial public offering expected in the coming weeks. The White House has separately criticized Anthropic CEO Dario Amodei's repeated warnings about the risks associated with artificial intelligence. President Donald Trump has described those warnings as a hoax.

Pentagon official celebrates court ruling

Emil Michael celebrated the appeals court decision in a post on X. "The hammer of justice has smashed Anthropic arguments."

He added, "Warfighters will sleep better knowing that no private company will insert their opinions in the chain of command."

The ruling comes amid a separate legal battle in California. A federal court there ruled last month that a broader ban imposed against Anthropic by the Trump administration was unlawful.

The Pentagon action upheld by the appeals court on Friday was based on federal public procurement regulations and remains effective. Anthropic said it disagreed with the ruling and indicated that it could pursue additional legal options. "We respectfully disagree with the court's decision. Another federal court has already held the government's parallel designation unlawful. We remain confident in our position and are considering all options, including further review," an Anthropic spokesperson said in a statement to US media.