A federal judge has barred the Pentagon from labeling Anthropic a supply chain risk, ruling that the government’s actions against the artificial intelligence company violated its First Amendment and due process rights. U.S. District Judge Rita Lin of the Northern District of California issued the preliminary injunction on Thursday, just two days after hearing oral arguments from both parties. The ruling has drawn attention from legal observers who say the government’s own internal records undermined its position.
The dispute traces back to a two-year, $200 million contract awarded to Anthropic in July 2025 by the Department of War’s Chief Digital and Artificial Intelligence Office. Negotiations broke down after the two sides failed to agree on usage restrictions for Anthropic’s AI model, Claude, which was to be deployed on the department’s GenAI.Mil platform. Anthropic insisted that Claude not be used for mass surveillance of Americans or for lethal autonomous warfare, arguing the model was not yet safe for either application.
At a meeting on February 24, Secretary of War Pete Hegseth told Anthropic’s representatives that the company had until February 27 to drop its restrictions or face an immediate supply chain risk designation. Anthropic refused. On that same day, President Trump posted a directive on Truth Social ordering all federal agencies to stop using Anthropic’s technology, describing the company as a “radical left, woke company.”
Shortly after Trump’s post, Hegseth characterized Anthropic’s position as a “master class in arrogance and betrayal” and ordered that no military contractor could conduct commercial activity with the firm. A formal supply chain risk designation followed in a letter dated March 3. Anthropic filed suit on March 9, alleging violations of the First Amendment, due process, and the Administrative Procedure Act. Judge Lin wrote in her order that “punishing Anthropic for bringing public scrutiny to the government’s contracting position is classic illegal First Amendment retaliation.”
The supply chain risk designation has historically been reserved for foreign intelligence agencies, terrorist organizations, and other hostile actors, and had never previously been applied to a domestic company. In the weeks following the designation, defense contractors began assessing and in many cases ending their reliance on Anthropic, according to Judge Lin’s order. The preliminary injunction, stayed for seven days, blocks all three government actions and requires a compliance report by April 6, restoring conditions to those that existed before February 27.
Legal experts say the government’s own documentation proved damaging to its case. Andrew Rossow, public affairs attorney and CEO of AR Media Consulting, told Decrypt that the designation was “triggered by press conduct, not a security analysis,” adding that “the government essentially wrote down its own motive, and it was retaliation.” Rossow described the use of the supply chain risk statute in this context not as a legitimate extension of the law but as a “weaponization” of it, and warned it forms part of a broader pattern of disproportionate government responses to challenges from private entities.
Policy strategist Pichapen Prateepavanich, founder of infrastructure firm Gather Beyond, told Decrypt that the ruling could encourage AI companies to formalize ethical guardrails when working with governments, and suggests that firms can set clear usage limits without automatically triggering punitive regulatory action. However, she cautioned that the ruling does not eliminate the underlying tension between government demands and corporate safety policies. What it does limit, she said, is the government’s ability to escalate such disagreements into broader exclusion or retaliatory labeling.
Rossow further warned that if the government’s legal theory were accepted, it would set a precedent allowing AI firms to be blacklisted for safety policies the government dislikes, without due process and before any harm occurs, under the justification of national security. The case is being closely watched as a potential marker for how disputes between AI developers and federal agencies over ethical constraints may be handled going forward. Judge Lin’s ruling currently stands as the first judicial check on the government’s use of supply chain risk authority against a domestic technology company.
Originally reported by Decrypt.
