Court Backs Pentagon Anthropic Ban - But the Fight Continues

Artificial Intelligence & Machine Learning , Litigation , Next-Generation Technologies & Secure Development Court Backs Pentagon Anthropic Ban - But the Fight Continues Ruling Keeps Claude Models Out of Defense Systems During Separate Legal Challenges Chris Riotta (@chrisriotta) • April 9, 2026     Share Post Share Credit Eligible Get Permission Image: Philip Yabut/Shutterstock A federal appeals court in Washington on Wednesday refused to pause the Pentagon's decision to blacklist Anthropic, setting up a split legal landscape that leaves the artificial intelligence company locked out of Department of Defense work - even as parts of the policy face challenges elsewhere in other courthouses. See Also: New OnDemand Webinar | Overcoming Top Data Compliance Challenges in an Era of Digital Modernization The D.C. Circuit Court of Appeals denied Anthropic's request to temporarily block the designation, allowing the Pentagon to continue removing the company's Claude models from military systems and barring contractors from using them in defense-related work. The ruling comes weeks after a federal judge in California, in a separate but related case, moved in the opposite direction - granting Anthropic preliminary relief that limits how broadly the administration can enforce restrictions tied to the "supply-chain risk" designation. The outcome, for now, is that Anthropic remains cut off from Pentagon contracts as the fight over how far the government can go in restricting its technology (see: Anthropic Fight Lays Bare How Fundamental AI Is to the DOD). The federal appeals court appeared to focus on the balance of harms instead of the underlying legality of the government's move, stating in its decision that "the equitable balance here cuts in favor of the government." "On one side is a relatively contained risk of financial harm to a single private company," the court said in its decision. "On the other side is judicial management of how, and through whom, the Department of War secures vital AI technology during an active military conflict." The decision doesn't resolve the underlying dispute, which upended the growing public sector AI market after Secretary of Defense Pete Hegseth labeled Anthropic a national security threat in March. The move - which came after Anthropic refused to effectively allow the military unrestricted use of its models - triggered the cancellation of contracts across the defense industrial base and led to a sweeping prohibition on its use across defense supply chains. Legal experts said the appeals court's decision sends a more skeptical signal toward Anthropic than the California district court ruling, but doesn't close off the company's broader challenges to the supply-chain risk designation. The appeals court panel granted expedited review, acknowledging that Anthropic "raises substantial challenges" and could face irreparable harm as the case proceeds. Harold Koh, a Yale Law School professor and former Department of State legal adviser who filed an amicus brief supporting Anthropic, said the ruling reflects a mixed outcome for the company. "Anthropic got some, if not all of what it asked for," Koh told ISMG. The court could still rule that the designation "is just the latest chapter in a concerted campaign of pretextual retaliations - parading in the guise of emergency national security regulation - that have characterized the second Trump administration," he said. The supply-chain risk designation applies specifically to Defense procurement, but its impact extends across contractors and subcontractors that support military operations. Under the current posture, contractors cannot use Anthropic's technology in military work - even if they continue using it in commercial or other government contexts. The appeals court noted that distinction in its ruling, stating that the government has not imposed a blanket ban across all uses of Claude - only those tied directly to defense contracts. Anthropic said in court filings that some federal contractors have paused or suspended work, including removing Claude from existing deployments, while private sector partners have backed away from deals amid uncertainty. Anthropic's chief financial officer warned that hundreds of millions in near-term revenue tied to the Pentagon could be at risk, with potential losses reaching into the billions if restrictions spill over into the broader commercial market. Anthropic has argued the designation is unlawful and retaliation over its refusal to allow its models to be used for certain military applications, including mass surveillance and autonomous weapons. The court did not weigh in on those claims, but pointed to unresolved legal questions around how broadly the government can define supply-chain risk. Those questions will now move forward alongside a parallel case in San Francisco federal district court, where Anthropic is challenging related authorities that fall outside the narrow procurement review process at issue in the appeals court. Legal analysts said the two cases serve different purposes. While the D.C. circuit case focuses on whether the government followed procurement regulations when labeling Anthropic a supply-chain risk, while the district court case goes further, allowing Anthropic to challenge the government's approach to the designation on constitutional grounds.