The debate started when Anthropic refused to give the US government unfettered access to its AI chatbot, Claude.
A court in the United States has rejected American artificial intelligence (AI) company Anthropic's request to shield it from being labelled a supply chain risk by the country's government. The label has never before been applied to an American company.
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The Trump administration labelled the AI company a supply chain risk and ordered federal agents to stop using Anthropic's AI assistant Claude in February, after the company refused to allow unrestricted military access to its model.
This label blocks contractors who work with the Pentagon from using the company's AI models on Department of Defence contracts.
The restrictions that are being disputed include the use of Claude for lethal autonomous weapons without human oversight and mass surveillance of Americans.
In 2025, Anthropic signed a $200 million (€171.5 million) contract with the Pentagon to deploy its technology within the military's systems.
Following that deal, the AI chatbot had been rolled out throughout the US government's classified information networks, deployed at national nuclear laboratories, and was doing intelligence analysis directly for the Department of Defence.
This setback for Anthropic in Washington comes after the company won a separate lawsuit focused on the same issues in a San Francisco court, which forced President Donald Trump’s administration to remove the label.
Anthropic filed the two lawsuits in San Francisco and Washington last month and accused the Trump administration of engaging in an "unlawful campaign of retaliation."
In their March filing, the Department of Defence wrote that Anthropic might "attempt to disable its technology or preemptively alter the behaviour of its model" before or during "warfighting operation" if the company "feels that its corporate 'red lines' are being crossed."
The panel at the D.C. Circuit Court of Appeals said it did not see any reason to revoke the Trump administration's actions because "the precise amount of Anthropic's financial harm is not clear." However, the appeals court will be hearing more evidence from this case in May.
“We’re grateful the court recognised these issues need to be resolved quickly and remain confident the courts will ultimately agree that these supply chain designations were unlawful," Anthropic said in a statement to the Associated Press.
