U.S. District Judge Rita Lin ruled on Thursday that the Pentagon's designation of Anthropic as a national security supply-chain risk was "illegal and baseless," vacating government directives that had barred federal agencies from using the company's AI technology1,2,3,4.
Lin, writing in a 59-page decision from the U.S. District Court for the Northern District of California, found that the designation constituted "unlawful retaliation in violation of the First Amendment". She also ruled that Anthropic was denied due process under the Fifth Amendment and that the government's action was "arbitrary and capricious".
"The empty invocation of national security is not a blank check to punish and retaliate against government critics," Lin wrote7,8,10.
The dispute traces to fall 2025, when the Defense Department approached Anthropic about integrating Claude into an internal platform called GenAI.mil. The Pentagon sought to use Claude for "all lawful purposes," including sensitive military and intelligence applications. Anthropic insisted that two categories remain off-limits: lethal autonomous weapons and mass surveillance of American citizens.
Earlier this year, Defense Secretary Pete Hegseth and President Donald Trump labeled Anthropic a supply-chain risk and ordered all federal agencies to stop working with the Claude maker. In March, Anthropic sued the Trump administration in both San Francisco and Washington, D.C., to reverse the blacklisting.
Lin's ruling pointed to what she called a disconnect in the government's own conduct. The Pentagon continued pursuing work with Anthropic even after the designation: "None of that is consistent with a genuine fear that Anthropic is a saboteur who would poison its software to harm national security," she wrote. Lin also noted Hegseth's proposition to apply the Defense Production Act to Anthropic, which she said contradicted the premise that the company posed a supply-chain threat.
The judge found that the government's "words and deeds confirm that the challenged actions were based on a desire to make a public example out of Anthropic for its 'arrogance' in criticizing the government"5.
Anthropic argued that the designation could cost the company billions of dollars in lost business and reputational harm.
"We welcome the court's ruling that this supply chain risk designation was unlawful," an Anthropic spokesperson told CNBC. The company said it "remains focused on working productively with the government to harness AI for national security so all Americans benefit from this technology".
The government is expected to appeal the ruling. Anthropic is also fighting a separate Pentagon designation under a different statute in the D.C. Circuit, and that litigation remains ongoing.
ANALYSIS The ruling establishes a concrete legal boundary around the government's ability to use supply-chain risk designations as leverage against AI companies that impose use-case restrictions on their models. The decision's First Amendment and Fifth Amendment findings, if upheld on appeal, would constrain the executive branch's capacity to economically penalize AI firms for publicly opposing military applications of their technology.