A federal judge ruled on Thursday that the Pentagon's decision to blacklist artificial intelligence firm Anthropic was unlawful, delivering a significant victory to the AI company in its dispute with the Trump administration. U.S. District Judge Rita Lin found that the Department of Defense's designation of Anthropic as a supply chain risk constituted illegal retaliation and violated the company's constitutional rights.
The legal battle began in March when Anthropic filed a lawsuit challenging the Pentagon's February designation. The company argued that the designation, which blocked it from military contracts and dealings with government contractors, was an unlawful act of retaliation for its refusal to permit its AI models, such as Claude, to be used for mass domestic surveillance or fully autonomous weapons. Anthropic contended that its AI systems were not reliable enough for such applications and opposed their use in these capacities.
Judge Lin's 59-page ruling stated that the government's actions were not based on evidence of Anthropic posing a security threat but rather on a desire to punish the company for its public criticism of the administration's views on AI deployment. "The empty invocation of national security is not a blank check to punish and retaliate against government critics," Judge Lin wrote. She added that the government's measures were "illegal and baseless" and constituted unlawful retaliation in violation of the First Amendment. The ruling also found that Anthropic was denied the due process required under the Fifth Amendment.
The Pentagon's move was the first time a U.S. company had been labeled a supply chain risk under a procurement statute typically used for foreign entities. Defense Secretary Pete Hegseth had stated that private companies should not constrain military action and that "America's warfighters will never be held hostage by the ideological whims of Big Tech." However, Judge Lin noted that the Pentagon continued to pursue work with Anthropic even after issuing the designation, which undermined its own claims of distrust.
Anthropic executives had warned that the blacklisting could cost the company billions of dollars in lost business and reputational damage. The ruling vacates the Pentagon's designation and bars federal agencies from enforcing the measures challenged by Anthropic. The government is expected to appeal the decision.
An Anthropic spokesperson welcomed the court's ruling, stating, "We welcome the court's ruling that this supply chain risk designation was unlawful. We remain focused on working productively with the government to harness AI for our national security so all Americans benefit from this technology.”
While this case involved the designation as a supply chain risk, a separate, overlapping case concerning a different Pentagon rule used to label Anthropic a supply chain risk is still ongoing in federal appeals court.