A US federal judge has ruled that the Trump administration’s decision to sanction AI company Anthropic was unlawful, finding that the Pentagon’s action was aimed at punishing the company for publicly opposing some government demands over the military use of artificial intelligence.
Judge Rita Lin, in a 59-page ruling issued Thursday, rejected the Pentagon’s decision to classify Anthropic as a national security “supply-chain risk”. The designation had restricted the AI company’s access to certain military contracts.
“The empty invocation of national security is not a blank check to punish and retaliate against government critics,” AFP quoted Lin as saying in her ruling. Lin vacated Anthropic’s supply-chain risk designation and found that the Department of Defense had violated the due process protections guaranteed under the Fifth Amendment.
The judge also ordered the Pentagon to withdraw all guidance, directives, communications and instructions issued against Anthropic following the designation.
How the Pentagon-Anthropic dispute began
The conflict between Anthropic and the US military centred on the company’s restrictions on how its Claude AI system could be used. Anthropic had refused to permit the military to use Claude for certain forms of domestic surveillance or autonomous weapons. The company argued that AI systems remain too unreliable to make independent decisions in situations involving lethal force.
Anthropic has also said that unrestricted domestic surveillance could threaten civil liberties and individual rights. The Pentagon rejected those restrictions, arguing that private companies should not be able to dictate how the US military uses technology for national security purposes.
The dispute escalated in February when the Pentagon designated Anthropic a national security supply-chain risk, effectively cutting the company off from some military contracts.
Anthropic subsequently sued, arguing that Defense Secretary Pete Hegseth had exceeded his authority. The company said the government’s decision could cost it billions of dollars in business and cause significant reputational damage.
Why the court ruling is significant
The ruling is a major setback for the Pentagon and a significant victory for Anthropic in the growing dispute over government control of AI technology. At the heart of the case was whether the government could use national security powers to penalise a domestic technology company after a disagreement over how its AI products should be used.
Judge Lin’s decision suggests that national security cannot be used as a blanket justification for government retaliation against companies that challenge or criticise official policy.
The case could have broader implications as technology companies increasingly provide AI systems to government and defence agencies.
Anthropic was first company publicly labelled a supply-chain risk
Anthropic became the first US company to be publicly designated a supply-chain risk under an obscure government procurement law designed to protect military systems from foreign infiltration and sabotage. The designation gave the Pentagon significant leverage over the company’s government business and reflected the seriousness of the dispute between the two sides.
The court has now overturned that designation in the California case.
However, the legal fight is not over.
Anthropic has another lawsuit pending in Washington, DC, challenging a separate Pentagon supply-chain risk designation. That case could affect the company’s ability to secure civilian government contracts. The dispute highlights a much larger debate over AI and national security: how much control should governments have over privately developed AI systems, and how far can companies go in restricting the military use of their technology?
As governments increasingly depend on advanced AI, the Anthropic case could become an important precedent for defining the limits of that relationship.
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