Anthropic and Pentagon Face Off in Court as Judges Appear Divided Over AI Blacklisting

Anthropic and U.S. government to face off in DC court over blacklisting of AI company

Dario Amodei, chief executive officer of Anthropic, at the AI Impact Summit in New Delhi, India, on Thursday, Feb. 19, 2026. A federal appeals court in Washington, D.C., is set to hear arguments on Tuesday in Anthropic's lawsuit over its blacklisting by the Department of Defense, the latest faceoff in the months-long clash between the Pentagon and one of the country's leading AI companies. The U.S. Department of Justice, on behalf of the DOD, and Anthropic will each have 15 minutes to present their case to a panel of three circuit judges, according to an order earlier this month. Judge Karen Henderson, Judge Gregory Katsas and Judge Neomi Rao will then take the matter under advisement and issue a written opinion. Proceedings will begin at 9:30 a.m. ET on Tuesday. Anthropic sued Defense Secretary Pete Hegseth and the DOD in March after the agency declared the AI startup a supply chain risk, meaning it purportedly threatens U.S. national security. The label has historically been reserved for foreign adversaries, and requires defense contractors to certify that they will not use Anthropic's Claude models in their work with the military. The designation landed after months of tense negotiations between Anthropic and the DOD collapsed. The DOD wanted Anthropic to grant the Pentagon unfettered access to its models across all lawful purposes, while Anthropic wanted assurance that its technology would not be used for fully autonomous weapons or domestic mass surveillance. The two sides failed to reach an agreement, and Hegseth blacklisted Anthropic and bashed the company on social media. Anthropic CEO Dario Amodei said the company had "no choice" but to challenge the supply chain risk designation in court. The DOD continued to use Anthropic's models to support its military operations Iran, and President Donald Trump told CNBC last month that a deal between the DOD and the startup is "possible."

Trump administration doubles down on Anthropic blacklisting in court arguments

Why it matters: Treating a U.S. company as a national security threat while looking to use its technology to combat foreign adversaries is an awkward needle to thread. Catch up quick: The Pentagon claims it's unworkable for the military or its vendors to rely on Anthropic because the company might pull the plug at any time due to its "ideological" views around AI safety. * Unlike other model-makers, Anthropic refused to agree to the Pentagon's "all lawful use" standard for AI deployment. * Anthropic argues it has no way to control its AI models once they're deployed in classified settings, and has stuck to its red lines around the use of its tools for mass domestic surveillance or the development of weapons that fire without human involvement. What they're saying: The Pentagon faced skepticism from the D.C. Circuit Court of Appeals in Tuesday's arguments. * "For the life of me, I do not see any evidence of maliciousness despite the best efforts of [Pentagon Under Secretary Emil Michael], who in his memo refers to you as having mal-intent, a bad motive, cannot be trusted," DC federal appeals court Judge Karen Henderson said. * "To me this is just a spectacular overreach by the department." But Anthropic found itself on the defensive, too. In an exchange with Anthropic's lawyer, Judge Gregory Katsas pinpointed the difficulty of the company's usage policies for evolving AI models. * "It doesn't really matter whether we focus on what might happen with the one they're currently using or what might happen with the one that everyone knows they will need three months from now, because AI three months from now will be totally different from the AI of today." Katsas and Judge Neomi Rao raised the Pentagon's concern that Claude is opaque (a feature of AI models that is not unique to Anthropic). * "Forget about all the crazy rhetoric about... 'crazy company' ... and forget about the concern about the kill switch in real time. They still have this concern, right? The model is unpredictable," Katsas said. The other side: The government's lawyer, Sharon Swingle, suggested the main issue is trust. Swingle said there's a "very real prospect of new red lines" and an "increasingly hostile posture" in negotiations. * Swingle said the Pentagon decided to use the supply chain risk designation instead of a less intrusive measure because it had to act quickly. * Anthropic's lawyer Kelly Dunbar, said if the government doesn't trust its model, it could simply decide not to do business with the company -- a less intrusive measure that Congress requires agencies to consider first. * The blacklisting is a permanent legal disbarment that risks broader government-wide, commercial exclusions -- and damages its reputation by applying the national security threat label, Dunbar argued. What's next: A split decision between the federal appeals court in DC and a San Francisco court means Anthropic can't enter into new defense contracts, but can continue its contracts with non-Pentagon agencies while litigation plays out.

Your Data Is At the Heart of the Pentagon's Battle with Anthropic

The Pentagon is in a heated battle with Anthropic, one of the most successful AI companies in the world -- and the temperature is only rising. When Anthropic refused to allow the federal government to use its products for lethal autonomous weapons or "mass domestic surveillance," the Trump Administration responded by designating Anthropic a "supply chain risk," effectively blacklisting the company across the federal government and jeopardizing hundreds of millions in government contracts. Anthropic has sued the Trump Administration in response, arguing that the designation amounts to ideological retaliation.

Appeals court hears Anthropic's Pentagon AI suit

Anthropic and the Pentagon squared off Tuesday in a federal appeals court, where the artificial intelligence firm faced an uphill battle in convincing three Republican-appointed judges that Secretary Pete Hegseth's supply chain risk label violated the law. Lawyers for the Defense Department and Anthropic faced intense questioning from a three-judge panel in the D.C. Circuit Court of Appeals, which previously rejected the AI firm's bid to temporarily halt the supply chain risk designation. The case could have major implications for the government's working relationship with technology companies and the procurement processes beneath federal contracts. Anthropic has also sued over the designation in a California federal court Two of three judges grill Anthropic Anthropic attorney Kelly Dunbar was grilled, mostly by Trump-appointed Judges Neomi Rao and Gregory Kastas, for nearly an hour. Each side was expected to present their case in 15 minutes, though Kastas quipped Dunbar was "on our time" at one point. Hegseth "turned a powerful national security authority against an American company, and he did so to gain leverage in a contract dispute," Dunbar told the panel ahead of questioning. Anthropic is suing the Trump administration, challenging both the Pentagon's designation -- typically reserved for foreign adversaries -- and President Trump's directive for civilian agencies to stop using Anthropic's products after negotiations fell apart over safety guardrails last February. Anthropic demanded its technology not be used in fully autonomous lethal weapons or for the mass surveillance of Americans, while the Pentagon insisted it be allowed to use Anthropic's Claude for "all lawful uses." Kastas' and Rao's initial questions primarily focused on legal procedure and what Anthropic is specifically asking the court to review. Dunbar specified Defense Secretary Pete Hegseth's formal designation on March 3 and the March 6 memo from Pentagon Chief Information Officer Kirsten Davies setting a 180-day deadline for the defense agency to remove Anthropic's AI products from its systems. Dunbar focused on the Pentagon's shifting reasoning for the designation. He contended the Pentagon initially issued the designation over concerns Anthropic had the "technical capability" to manipulate its models after deployment, but then switched its rationale to concerns over Anthropic manipulating the model beforehand. After filing the suits in DC and California courts, Anthropic argued in subsequent briefs that the Pentagon's assertion that the firm had the technical ability to manipulate models post-deployment was "factually incorrect." "There's a fundamental pivot in the government's defense of the designation," Dunbar said, adding it is an "acknowledgement of how" Hegseth "was thinking about the problem." Kastas acknowledged the case process has been "weird" and a back-and-forth ensued on more legal procedure, with Rao appearing skeptical of Anthropic's claims. "There is a fundamental difference between asking Secretary Hegseth to rescind an already existing designation based on new evidence and a question about whether moving forward, the secretary would reach the same decision if he knew, if he knew that a critical part of his prior risk analysis was wrong," Dunbar said. Third judge slams Pentagon's reasoning Judge Karen LeCraft Henderson, an appointee of former President George H.W. Bush, displayed a much friendlier attitude towards Anthropic's argument. "For the life of me, I do not see under the definition of any evidence of maliciousness, of despite the best efforts" [Emil] Michael, [the under secretary of Defense for research and engineering], who in his memo refers to you as having 'mal intent, a bad motive, cannot be trusted," Henderson told Dunbar. "I see no evidence of that," Henderson continued. "I don't see that the department has in any way supported its determination that there is a supply chain risk with Anthropic, much less a significant supply chain risk." Henderson called it a "spectacular overreach by the department," and questioned whether the Pentagon considered "less intrusive means." Dunbar welcomed Henderson's perspective as expected, suggesting a less intrusive measure could include just stopping the DOD's procurement of new Claude models if leadership is not "comfortable" rather than jumping to the blacklisting authority. Rao then pushed back on Dunbar, saying the Defense secretary was "making more general points" than Dunbar identified, adding the government is "relying" on the "opaque" nature of AI models. "The fact that there could be things embedded even in current models of Claude that the government is using that may operate in ways that create certain risks that the government cannot detect. I mean, I think all of that is reflected in the government's reasoning," Rao said, appearing to resonate with the Pentagon's view. Kastas signaled a more open mind, asking Dunbar to lay out the differences between a supply chain risk designation and a less intrusive measure. Dunbar pointed to the reputational harm Anthropic cites in its suit. The designation, Dunbar said, "risks broader commercial cascading commercial implications that a simple, ordinary procurement decision I would submit..would not." Government asked to break down supply chain risk rationale Nearly an hour into the hearing, government attorney Sharon Swindle presented her case to the panel, making it clear the DOD has a deep distrust of Anthropic following the negotiation fallout. When asked by Kastas whether the government would allow Anthropic putting an "all lawful use limitation" into its models, Swindle questioned whether the DOD can "trust" the AI firm to not go beyond that. "If the department had the trust that the guardrails would be limited in that way, that was not the objection," Swindle said. "The objection is the concern that there will be red lines imposed that the department is unaware of." Kastas said he "gets the point about the need for trust," acknowledging the models are difficult to test. "In setting the guardrails, [Anthropic] made clear that there was a very real sense in which anthropic did demand an operational veto, in the sense that it felt that its own perception of what a lawful use would entail should override that of the department," Swindle responded. She added Anthropic did not make clear the lethal autonomous weapon redline until the DOD considered bringing the AI firm on as a prime contractor rather than as a subcontractor. Pressed by Rao over why the department did not use alternatives to the risk label, Swindle contended that designation allowed for leadership to make the entire agency aware of Anthropic's alleged risks. Rao asked again why a memo was not sufficient and Swindle pointed back to the situation's urgency. Swindle pushed back on Anthropic's push for less intrusive measures, stating a memo or statement would "have been no less intrusive than what was done." What comes next While the judges did not grant Anthropic's earlier request to pause the designation, the judges agreed to expedite the case in the wake of its potential impacts on Anthropic. Rao and Kastas both seemed skeptical of some of Anthropic's arguments, with Henderson the only to show clear opposition to the Pentagon's actions. It is not clear how each judge will eventually weigh and a decision could take anywhere from a few weeks to months. The panel's previous decision broke from that of a federal judge in California, who temporarily blocked the supply chain risk designation in March. Should the two circuit courts rule differently, it could pave the way for a legal battle up to the Supreme Court.

Appeals court judges appear to be divided over Pentagon's legal dispute with AI company Anthropic - The Economic Times

Three judges from the U.S. Court of Appeals for the District of Columbia Circuit didn't indicate how soon they would rule on Anthropic's appeal, but some of their questions and remarks hinted at how they might decide the case.A panel of appellate judges appeared to be divided on Tuesday over a legal dispute between the Pentagon and technology company Anthropic, which claims Defense Secretary Pete Hegseth unlawfully and falsely branded it as a national security risk for raising ethical and safety concerns about AI usage in war. Three judges from the U.S. Court of Appeals for the District of Columbia Circuit didn't indicate how soon they would rule on Anthropic's appeal, but some of their questions and remarks hinted at how they might decide the case. Judge Karen LeCraft Henderson said she sees no evidence to support the Pentagon's determination that Anthropic poses a supply-chain risk to national security. "To me, this is just a spectacular overreach by the (Defense) Department," said Henderson, who was nominated by Republican President George H. W. Bush. Judge Neomi Rao, who was nominated by Republican President Donald Trump, questioned what basis the court could have for second-guessing Hegseth's judgment. The Pentagon's dispute with Anthropic centers on how AI technology can be used in fully autonomous weapons and potential surveillance of Americans. "I take the secretary to be making more general points than the ones that you've identified," Rao told Anthropic attorney Kelly Dunbar. "It's about risk, and they say, 'Well, based on what we know, we can't trust that the (AI) model may not have something embedded within it that is going to create a problem for military capabilities." Anthropic filed lawsuits in Washington, D.C., and San Francisco after the Pentagon designated the San Francisco-based company as a supply chain risk and Trump ordered all federal agencies to stop using its technology. Anthropic claims the Pentagon is illegally retaliating against it by stigmatizing it with a designation meant to protect against sabotage of national security systems by foreign adversaries. Anthropic says neither lawsuit seeks to force the government to contract with the company. But it claims that it has been irreparably harmed by Hegseth's supply-chain risk designation. Earlier this month, the D.C. circuit rejected Anthropic's request for an order that would have blocked the Pentagon's actions while the company's appeal is pending. In a separate but related case, a federal judge in San Francisco ruled in Anthropic's favor last month and blocked the Pentagon from labeling Anthropic as a supply-chain risk. In a court filing ahead of Tuesday's hearing in Washington, Anthropic said it can't manipulate its AI tool Claude once it is deployed in classified Pentagon military networks. But a Justice Department attorney, Sharon Swingle, told the D.C. Circuit judges that Anthropic clearly has the ability to interfere with the Pentagon's usage of the company's AI model "for critical military operations." "It's undisputed that the failure of the model in active military operations could have catastrophic national-security consequences and put service members' lives at risk," she said. Dunbar said Hegseth's designation of Anthropic as a supply-chain risk "defied congressionally mandated procedures, exceeded statutory limits and violated the Constitution." "For the first time ever, the secretary turned a powerful national security authority against an American company, and he did so to gain leverage in a contract dispute," Dunbar said. Judge Gregory Katsas, another Trump nominee, also heard Tuesday's arguments.

Anthropic Crackdown A 'Spectacular Overreach': Federal Judge

Federal Judge Calls US Crackdown On Anthropic 'Spectacular Overreach' Anthropic faced a fresh round of legal scrutiny Tuesday as the Trump administration defended a Pentagon move that labels the AI company a supply chain risk. The government detailed its position in response to Anthropic's challenge to a designation that restricts its ability to pursue new Defense Department work. In court, judges questioned the Pentagon's rationale. "For the life of me, I do not see any evidence of maliciousness despite the best efforts of [Pentagon Under Secretary Emil Michael], who in his memo refers to you as having mal-intent, a bad motive, cannot be trusted," Judge Karen Henderson said. "To me, this is just a spectacular overreach by the department," she added. 'Crazy Company' Katsas and Judge Neomi Rao also pointed to Defense Department worries about model behavior and transparency, saying, "Forget about all the crazy rhetoric about... 'crazy company' ... and forget about the concern about the kill switch in real time. They still have this concern, right? The model is unpredictable." The Pentagon has argued it cannot depend on Anthropic or its vendors because the company could cut off access based on its AI safety views, and because Anthropic would not accept the military's "all lawful use" requirement. Anthropic said it can't oversee how its systems are used once they're deployed in classified environments. The company claims it has drawn boundaries around certain applications such as large-scale domestic monitoring and weapon systems that operate without a human decision-maker. Government attorney Sharon Swingle told the court the dispute centers on confidence in the vendor, citing what she described as a "very real prospect of new red lines" and an "increasingly hostile posture" during the court proceeding. Swingle also noted that the Pentagon chose the supply chain designation instead of a more mild approach because it believed it needed to move fast. Anthropic attorney Kelly Dunbar argued that if the government doubts Anthropic's AI technology, it could avoid contracting with the company rather than impose a broader restriction that Congress expects agencies to weigh against less sweeping alternatives. Dunbar said the designation functions as a lasting exclusion that can spill into wider government and commercial limits, while also tagging the company with a national security stigma. Anthropic Blocked A split between rulings in Washington and San Francisco means Anthropic is blocked from signing new Defense Department contracts, but can keep working with non-Pentagon federal customers while the cases continue. The D.C. appeals court agreed to expedite the matter and could issue a decision within weeks, though more complicated cases can take longer. President Donald Trump has given the Pentagon a six-month window, through August, to remove Anthropic from its systems. Last month, Trump said Anthropic was improving its standing with his administration, raising the prospect that the Pentagon could revisit its ban. Trump's comments followed a White House meeting with Anthropic CEO Dario Amodei and White House officials to discuss collaboration and guardrails around advanced AI systems. Anthropic said the discussion centered on how the two "can work together on key shared priorities such as cybersecurity, America's lead in the AI race and AI safety." Reuters reported that Trump told CNBC's "Squawk Box" he believed the company was "shaping up" and suggested an agreement with the Pentagon could be possible. He added, "It's possible. We want the smartest people." The next court hearing will take place on June 5, 2026. Photo: Shutterstock This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.