Judge voids Pentagon’s supply-chain blacklist of Anthropic

U.S. District Judge Rita F. Lin ruled on 27 August that the Pentagon’s February decision to list Anthropic as a national-security supply-chain risk was unlawful. The 59-page order vacates Defense Secretary Pete Hegseth’s 27 February designation, lifts extra penalties that barred military contractors from dealing with the company, and finds that nine federal agencies applied those measures without legal basis.

“The empty invocation of national security is not a blank check to punish and retaliate against government critics,” Lin wrote. She held that the record showed First Amendment retaliation, a denial of Fifth Amendment process before the company lost business, and an “arbitrary and capricious” use of a procurement statute written for foreign sabotage of military systems. It was the first time Washington had publicly pinned that label on a U.S. firm.

How the fight started

Anthropic, the maker of the Claude models, had drawn public “red lines” on military uses it would not accept. Hegseth then designated the company a supply-chain risk, a status that can freeze federal contracts and scare off suppliers. Anthropic sued in the Northern District of California on 9 March, arguing the government was punishing speech rather than protecting software. Lin issued a temporary block the same month. Thursday’s ruling makes that block permanent and takes effect at once. The government may appeal.

The judge noted a contradiction in the Pentagon’s own files. Department records, she wrote, showed officials still pursuing work with Anthropic 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.” An earlier order had already quoted internal language that the company was targeted for a “hostile manner through the press.”

Lin was appointed by former President Joe Biden. She stressed that the Department of War remains free to pick any vendor it wants. The ruling does not force the Pentagon to run Claude on its networks. It only strips the blacklist and the satellite sanctions that followed it.

What the order covers

Nine agencies, including the Pentagon, the Treasury, the State Department and the Department of Homeland Security, had layered restrictions on Anthropic after Hegseth’s label. Lin removed those penalties. Contractors who had been told they could not buy from or sell to the company are no longer under that instruction from the court’s point of view. Whether procurement officers quietly keep their distance is a separate commercial question.

Anthropic said in a statement that it welcomed the finding and still wanted to “work productively with the government to harness AI for our national security.” A Pentagon comment was not immediately available. The department is expected to take the case to the Ninth Circuit.

The underlying statute was built to keep foreign components out of weapons and logistics systems. Using it against a domestic model-maker that had argued in public about battlefield limits stretched the text, Lin found. She also held that the company was denied the hearing that the Fifth Amendment requires before the government takes away a property interest of this size. Anthropic had told the court the designation could cost it billions in lost federal and contractor work and in reputational harm.

What remains open

Two tracks now run in parallel. One is the appeal. The other is ordinary procurement. The Pentagon can still decline Claude for classified or unclassified work and can still write contract clauses that prefer other labs. What it cannot do, under this order, is treat Anthropic as a saboteur in the supply chain or instruct the rest of the federal family to freeze it on that theory.

The case will be read in other capitals as a test of how far a government can go when an AI lab refuses certain military tasks and then talks about that refusal. Lin’s answer, on this record, is that the government may walk away from the product. It may not convert a policy quarrel into a sabotage listing.

For contracting officers the immediate task is mechanical. Clauses that cite the February designation need to be pulled. Vendor lists that dropped Anthropic on the strength of that designation need a second look. The models themselves have not changed. The legal wrapper around them has.