US appeals court upholds Pentagon's supply-chain-risk designation of Anthropic

Reuters reported at 15:20 UTC on September 25 that the US Court of Appeals for the District of Columbia Circuit rejected Anthropic's challenge in a 2-1 decision and upheld the Pentagon's March national-security supply-chain-risk designation. The majority said it was reasonable to fear that overly constrained models could shut down during critical military operations.

The dispute arose after Anthropic refused to remove Claude restrictions covering fully autonomous weapons and mass domestic surveillance. The company says current AI is not reliable enough to operate autonomous weapons safely and regards mass domestic surveillance as a violation of fundamental rights. The government argues the restrictions could compromise military readiness.

The court rejected Anthropic's argument that the government retaliated against its views on AI safety and ethics. Anthropic said it respectfully disagreed, remained confident in its position and was considering options including review by the full appeals court.

The ruling does not erase the divergent result in parallel litigation. A San Francisco federal judge in August struck down a parallel designation under a different law and blocked a government-wide ban and an order barring military contractors from doing any business with Anthropic. The September 25 Washington ruling concerns the supply-chain-risk designation under another statute, so it should not be described as restoring every government restriction.

Anthropic says the label has exposed it to billions of dollars in lost business and reputational harm ahead of an expected initial public offering. The case also sets an important, still-appealable marker for how far the government may go when an AI supplier refuses certain military and surveillance uses.

Verification: confirmed by the federal appeals-court decision, Anthropic's public response and Reuters reporting. News value: A. Origin: United States. Primary section: Technology. Related regions: Canada and worldwide. Source time: September 25, 2026, 15:20 UTC. N Globe report time: September 25, 2026, 20:28 UTC. N Globe editorial illustration, not documentary imagery.