A federal appeals court on Wednesday upheld the Pentagon's authority to blacklist artificial intelligence laboratory Anthropic over national security concerns, delivering a significant blow to the San Francisco company as it battles the Trump administration over military deployment restrictions and surveillance safeguards for its Claude chatbot.
The U.S. Court of Appeals in Washington, D.C., rejected Anthropic's request for an order that would shield the company from Pentagon blacklisting while the panel collects evidence about the case. The decision creates a split with a separate ruling in San Francisco federal court, where a judge forced the Trump administration to remove a label tainting Anthropic as a national security risk.
Conflicting Court Rulings Create Business Uncertainty
The divergent legal outcomes stem from two separate lawsuits Anthropic filed last month in San Francisco and the Washington appeals court. The company asserted the Trump administration was engaging in an "unlawful campaign of retaliation" because of its attempt to impose limits on how its AI technology can be deployed. The Trump administration blasted Anthropic as a liberal-leaning company trying to dictate U.S. military policy.
In the San Francisco case, U.S. District Judge Rita Lin ruled that the Trump administration had overstepped its bounds by labeling Anthropic a supply chain risk unqualified to work with military contractors and issuing other directives that could cripple a company locked in a race for AI supremacy against rivals such as ChatGPT maker Open AI and Google. That decision prompted the Trump administration to remove the stigmatizing labels from Anthropic and take other steps clearing the way for government employees and contractors to continue using Claude and other chatbots, according to court filing made in San Francisco earlier this week.
Appeals Court Cites Unclear Financial Harm
The Washington appeals court reached a different conclusion, even though it conceded the company would "likely suffer some degree of irreparable harm" if it's deemed a supply chain risk. The appeals court didn't see sufficient reason to issue its own order revoking the Trump administration's actions, partly because "the precise amount of Anthropic's financial harm is not fully clear." Further evidence in the case is scheduled to be presented before the appeals court in a hearing scheduled for May 19.
"We're 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," Anthropic said in a statement.
The dispute centers on how the Pentagon could deploy Claude chatbot in fully autonomous weapons and potential surveillance of Americans. The Trump administration's concerns reflect broader questions about whether AI companies should be permitted to restrict how their technology is used by military and defense contractors once those entities have access to the systems.
Matt Schruers, the CEO of the technology trade group Computer & Communications Industry Association, expressed worries that the conflicting court decisions issued so far in the standoff between Anthropic and the Trump administration will muddle the business landscape at a pivotal time. "The Pentagon's actions and the DC Circuit's ruling create substantial business uncertainty at a time when U.S. companies are competing with global counterparts to lead in AI," Schruers said.
Why This Matters:
The split court decisions expose fundamental tensions over government authority to regulate AI companies that seek to impose restrictions on military applications of their technology. The Pentagon's ability to designate companies as supply chain risks directly affects national security preparedness and the defense industrial base at a time when global competitors, particularly China, are racing to achieve AI dominance. The conflicting rulings create regulatory uncertainty that could hamper American companies competing for AI supremacy while their international rivals operate under fewer constraints. The case also raises questions about whether private companies can effectively veto how government agencies deploy commercially available technology, potentially limiting military readiness and operational flexibility. The May 19 hearing will provide clarity on whether national security considerations or corporate preferences take precedence in AI deployment decisions.