Federal Judge Strikes Down Pentagon Ban on Anthropic AI Models as Unconstitutional Retaliation

Quick Facts

• U.S. District Judge Rita Lin ruled the Pentagon’s designation of Anthropic as a national security supply chain risk was unconstitutional retaliation in violation of the First and Fifth Amendments.
• The ban, ordered by Defense Secretary Pete Hegseth, threatened to erase multiple billions of dollars in 2026 revenue and canceled existing military contracts.
• The ruling takes effect immediately and permanently bars federal agencies from enforcing the ban on Anthropic’s products.

A federal judge has struck down the U.S. Defense Department’s ban on Anthropic PBC’s artificial intelligence models, calling the government’s actions “illegal and baseless” in a 59-page ruling issued Thursday night.

U.S. District Judge Rita Lin found that Defense Secretary Pete Hegseth’s decision to label Anthropic a national security supply chain risk amounted to “unlawful retaliation” against the company’s public advocacy on AI safety, violating the First Amendment. She also ruled the company was denied due process under the Fifth Amendment.

“The empty invocation of national security is not a blank check to punish and retaliate against government critics,” Lin wrote in her decision.

The conflict began in fall 2025, when the Defense Department sought to bring Anthropic’s Claude model to an internal platform called GenAI.mil. The government asked Anthropic to remove a clause in its terms of use that prohibits customers from using Claude for mass surveillance of Americans or to build autonomous weapons. Anthropic CEO Dario Amodei refused, saying the company could not “in good conscience” comply.

President Donald Trump then ordered all federal agencies to stop using Anthropic’s products. Hegseth invoked the Federal Acquisition Supply Chain Security Act, a statute previously applied only to foreign adversaries such as Huawei and ZTE, to designate Anthropic a supply chain risk. It was the first time the designation had been applied to a U.S. company.

The Pentagon’s formal designation in March canceled Anthropic’s military contracts and barred Pentagon contractors from using its technology. The government argued in court that Anthropic’s refusal to accept contractual terms, not its public positions, drove the decision. The Justice Department warned the restrictions could disable military systems during operations.

Judge Lin rejected those arguments. She noted that the Pentagon continued pursuing work with Anthropic even after the designation, including through Project Glasswing and a cybersecurity model called Mythos, which the NSA and NASA had begun deploying. Senior White House officials also held what Anthropic described as “productive and constructive” talks with Amodei.

“None of that is consistent with a genuine fear that Anthropic is a saboteur who would poison its software to harm national security,” Lin wrote. She found the government assembled its case “after the fact to justify the foreordained conclusion.”

The financial stakes were significant. Anthropic CFO Krishna Rao testified that the government’s actions could reduce the company’s 2026 revenue by multiple billions of dollars, with projected losses of more than $150 million in annual recurring revenue tied to Defense Department contracts. The company also faced potential losses of 50% to 100% of revenue from defense contractors and others dependent on the Pentagon. More than 100 enterprise customers contacted the company following the designation.

The ruling makes permanent a temporary suspension Lin had ordered in March. It bars all named federal agencies from enforcing the stop-use order and overturns the supply chain risk designation entirely.

Those figures come at a moment of rapid growth for the company. Anthropic reported record revenue of $11.5 billion earlier this month, 14 times higher than the same quarter last year. Public sector revenue had also surged, with a fourfold increase in annual recurring revenue run rate from government customers between December 2025 and January 2026.

“We welcome the court’s ruling that this supply chain risk designation was unlawful,” an Anthropic spokesperson said. “We remain focused on working productively with the government to harness AI for our national security so all Americans benefit from this technology.”

Read more: Court rules Pentagon can’t ban Anthropic’s AI models