Anthropic Loses Appeals Court Bid To Pause Supply Chain Risk Label

A three-judge panel at the D.C. Circuit Court of Appeals on Wednesday rejected a request by the artificial intelligence startup Anthropic to pause the government’s designation of the company as a supply chain risk.

The decision leaves in place at least part of the Defense Department’s official designation of Anthropic’s products as risks to national security. The label — never before applied to an American company — blocks contractors who work with the Pentagon from using Anthropic’s AI models on DOD contracts.

Last month, a federal judge in California temporarily blocked the Pentagon’s supply chain risk label. But due to a quirk in U.S. law, Anthropic was forced to also challenge the designation at the D.C. Circuit. Even as supporters of the company celebrated their win in California, lawyers and tech lobbyists warned those victory laps were “premature” until the D.C. Circuit also rules.

Anthropic’s lawyers had warned the D.C. Circuit that the label had already caused the company to lose money, and that the reputational hit could drag down its broader business. They urged the judges to issue an emergency injunction that would pause the supply chain risk designation until courts could reach a decision on the merits.

But in a four-page ruling, the judges wrote that the “equitable balance here cuts in favor of the government.”

“On one side is a relatively contained risk of financial harm to a single private company,” the panel wrote. “On the other side is judicial management of how, and through whom, the Department of [Defense] secures vital AI technology during an active military conflict.”

The judges added that they agreed with Anthropic that the company “will likely suffer some irreparable harm,” and that an expedited decision is warranted.

An Anthropic spokesperson said the company is “grateful the court recognized these issues need to be resolved quickly and remain confident the courts will ultimately agree that these supply chain designations were unlawful.” A DOD spokesperson did not immediately respond to a request for comment.

Two of the judges on the panel, Gregory Katsas and Neomi Rao, both Trump appointees, have taken expansive views of the government’s national security powers in past cases. In August, they threw out a lower court ruling that sought to hold Trump administration officials in criminal contempt for sending 130 Venezuelan men to a prison in El Salvador.

The D.C. Circuit’s decision represents an inflection point in the nearly two-month clash between the Pentagon and Anthropic over the company’s attempt to restrict how the government uses its products.

In February, Anthropic CEO Dario Amodei told Defense Secretary Pete Hegseth that he would not allow the Pentagon to use the company’s Claude AI model to empower autonomous weapons or surveil American citizens en masse. The high-stakes standoff culminated in Hegseth and Trump labeling Anthropic a supply chain risk.

Christine Mui contributed to this report.