A three-judge panel of the D.C. Circuit Court of Appeals on Wednesday rejected a request by Anthropic to pause the Defense Department’s (DOD) designation of the company as a supply chain risk.
The decision leaves in place at least part of the DOD’s official designation of Anthropic’s products as risks to national security. The label blocks contractors who work with the DOD from using Anthropic’s AI models on defense contracts.
“In our view, the equitable balance here cuts in favor of the government,” the appeals court said in its decision. “On one side is a relatively contained risk of financial harm to a single private company. 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. For that reason, we deny Anthropic’s motion for a stay pending review on the merits.”
Under the Trump administration, the DOD was rebranded as the War Department.
The court acknowledged Anthropic “will likely suffer some degree of irreparable harm absent a stay,” but said the company’s interests “seem primarily financial in nature.” It also rejected the company’s claim that the DOD violated its free speech rights, saying Anthropic “does not show that its speech has been chilled during the pendency of this litigation.”
The dispute stems from a clash between the DOD and Anthropic over the company’s refusal to allow its AI models to be used in mass domestic surveillance or fully autonomous weapons.
In response, Trump ordered federal agencies to sever ties with Anthropic. Soon after, Defense Secretary Pete Hegseth labeled the company a supply chain risk.
Anthropic filed two lawsuits alleging illegal retaliation, while the government has defended the designation as lawful and based on national security concerns.
The D.C. Circuit Court of Appeals’ ruling follows a separate decision late last month by a federal judge in San Francisco, who granted Anthropic a preliminary injunction barring the Trump administration from enforcing a ban on the use of its Claude model.
With the split decisions, Anthropic is excluded from DOD contracts, but it can continue working with other government agencies while litigation proceeds. Defense contractors are prohibited from using Claude in their work with the Pentagon, but they may use it in other contexts.
In a post on X, acting Attorney General Todd Blanche called the court’s decision a “resounding victory for military readiness.”
“Our position has been clear from the start – our military needs full access to Anthropic’s models if its technology is integrated into our sensitive systems. Military authority and operational control belong to the Commander-in-Chief and Department of War, not a tech company,” the post states.
Additionally, the court said Anthropic has raised serious arguments and could be harmed while the case continues, so it plans to move the case forward quickly.
A schedule for the next steps in the D.C. case will be released soon.