A federal appeals court in Washington ruled 2-1 to uphold the Pentagon's decision to classify AI startup Anthropic as a national security supply chain risk, barring the company from military contracts. The legal dispute arose after Anthropic refused to permit its artificial intelligence technology to be utilized for autonomous weapons and mass surveillance. Defense Secretary Pete Hegseth defended the move, arguing that the company's safety restrictions could potentially jeopardize military operations. Anthropic strongly rejects the ruling and announced it is currently weighing its next legal steps.
The security designation has severely impacted the AI firm, costing it billions of dollars and disrupting its planned initial public offering, according to company statements. The ongoing clash follows a separate legal battle in late August, when a federal judge in San Francisco blocked a parallel classification under a different law, describing it as unlawful retaliation against the company's AI safety policies. Despite the military ban, US intelligence agencies continue to be heavy users of Anthropic's AI models, creating a complex operational contradiction.
The conflict has drawn broader attention due to political friction, with the Trump administration explicitly viewing the company as left-leaning and targeting it accordingly, while parts of the tech industry and former military officials have publicly backed Anthropic. Why it matters: The appeals court ruling sets a high-stakes precedent for how the US military can penalize AI developers that enforce strict ethical boundaries on their technology.