On the evening of August 27, 2026, U.S. District Judge Rita Lin ruled that the Pentagon's designation of the AI company Anthropic as a “supply chain risk” to national security was illegal, and ordered the designation removed. She found the action was “unlawful retaliation in violation of the First Amendment,” that it was “arbitrary and capricious,” and that the company “was denied the pre-deprivation process required under the Fifth Amendment.”
The designation was an unusual instrument to reach for. It had previously been used only against companies seen as connected to foreign adversaries. Applied to Anthropic in February 2026, it barred the Pentagon and its contractors from using the company's products. The dispute began after Anthropic refused to remove safety guardrails that would have permitted the military to use its models for fully autonomous weapons and for mass surveillance of American citizens. Hegseth said the government could not allow the American military to be constrained or told how to use its tools by a private company. The Pentagon denied it would use the models for anything but lawful purposes.
What moved the court was the mismatch between the stated national-security rationale and the government's own conduct. Lin wrote that the government's “words and deeds confirm that the challenged actions were based on a desire to make a public example out of Anthropic for its 'arrogance' in criticizing the government,” and not on any articulable basis to believe the company would sabotage its model. She noted that Hegseth had separately proposed applying the Defense Production Act to Anthropic, “which would mean the company was essential to national security rather than a threat to it.” She noted the Defense Department kept pursuing a contract with the company, that other parts of the government continued working and meeting with it, and that the company has no backdoor access to its technology once the Pentagon has it.
“None of that,” Lin wrote, “is consistent with a genuine fear that Anthropic is a saboteur who would poison its software to harm national security.”
Her summary of the limit: “Though the Department of War is undisputedly free to select the AI vendor of its choice, the evidence demonstrates that the broad measures imposed on Anthropic were illegal and baseless. The empty invocation of national security is not a blank check to punish and retaliate against government critics.”
Lin is a Biden appointee to the Northern District of California. Anthropic filed two complaints against the Defense Department in March, in California and in Washington, D.C.; the D.C. case is still pending. In a June interview with Axios, Trump said that while he had previously viewed Anthropic as a national security threat, he no longer did. An Anthropic spokesperson said the company welcomed the ruling and remains “focused on working productively with the government.” The Pentagon did not immediately comment (see The Pentagon Says in Court It Used Musk's Grok AI to Help Target Iran Strikes, Firing 2,000 Munitions in 96 Hours and Trump Renames the Defense Department the 'Department of War' by Executive Order).
Update (September 25, 2026): the other court ruled the other way. The Pentagon relied on two separate designations, so Anthropic had to challenge them in two courts: Judge Lin's ruling covered one, and the U.S. Court of Appeals for the D.C. Circuit heard the other. On September 25 a D.C. Circuit panel upheld the second designation, 2-1. Judge Gregory Katsas wrote for the majority, joined by Judge Neomi Rao, both Trump appointees: “The Department had ample support for its conclusion that the continued integration of Claude into the Department's information systems, by the Department or its contractors, presented a statutorily covered national-security risk.” He added: “In our Republic, it is the President and the Secretary of War who must determine how best to balance the competing risks.” Judge Karen LeCraft Henderson, a George H.W. Bush appointee, dissented.
The panel delayed its decision from taking immediate effect to give Anthropic time to seek rehearing by the panel or the full court, CNBC reported, and the company could also ask the Supreme Court to take the case. An Anthropic spokesperson: “Another federal court has already held the government's parallel designation unlawful. We remain confident in our position and are considering all options, including further review.” Emil Michael, the undersecretary of war for research and development, responded: “The hammer of justice has smashed [Anthropic] arguments.”