A federal judge in San Francisco ruled Thursday that the Pentagon acted illegally when it labeled AI company Anthropic a supply chain risk, finding the designation violated the First Amendment.
CNBC reports that U.S. District Judge Rita Lin found that the Department of Defense punished Anthropic for criticizing the administration publicly, not for an actual security concern. The designation, issued in March 2026, made Anthropic the first American company publicly named a supply chain risk. That label barred defense contractors from using its technology in Pentagon-related work.
The dispute traces back to collapsed negotiations over military use of Anthropic’s Claude AI models. Anthropic wanted assurances that its technology wouldn’t be used for fully autonomous weapons or domestic mass surveillance. The Defense Department wanted unrestricted access to Claude for any lawful purpose instead. When talks broke down, DOD designated the company a supply chain risk.
Breitbart News reported on Anthropic’s lawsuit when it was filed:
The company’s complaint states that federal government contracts are already being terminated, while both current and prospective private sector agreements face uncertainty. According to the filing, these actions jeopardize hundreds of millions of dollars in near-term revenue. Anthropic CFO Krishna Rao provided additional context in a related filing, suggesting the financial impact could be far more substantial. “Across Anthropic’s entire business, and adjusting for how likely any given customer is to take a maximal reading, the government’s actions could reduce Anthropic’s 2026 revenue by multiple billions of dollars,” Rao said.
The supply chain risk designation, which was officially confirmed last week, represents an extraordinary measure historically reserved for foreign adversaries. Under this classification, defense vendors and contractors must certify they do not utilize Anthropic’s AI models, known as Claude, in any work performed for the Pentagon. This requirement effectively blocks the company from participating in defense-related contracts and projects.
President Donald Trump amplified the administration’s stance through social media last month, directing federal agencies to immediately cease all use of Anthropic’s technology. “WE will decide the fate of our Country — NOT some out-of-control, Radical Left AI company run by people who have no idea what the real World is all about,” Trump wrote.
Judge Lin wrote that the designation was “based on a desire to make a public example” of Anthropic, and that government deference on national security matters doesn’t excuse a lack of “articulable basis” for the action taken. She quoted the government’s own justification: because of Anthropic’s “increasingly hostile manner through the press” and its criticism of the Department of War’s views on AI use, defendants “cannot trust Anthropic to ensure the integrity of its models.”
She rejected that reasoning outright. “Neither the Constitution nor the federal statute invoked by Defendants allows them to impose sweeping penalties based principally on Anthropic’s critique of the Administration’s views,” she wrote.
Anthropic had sued the Trump administration in two separate courts, San Francisco and Washington, D.C., because the designation rested on two distinct legal bases, each requiring its own case. Thursday’s ruling resolved only the San Francisco matter. The Washington case is still pending, so Anthropic technically carries the supply chain risk label until that case concludes as well.
An Anthropic spokesperson said the company was pleased with the outcome. “We welcome the court’s ruling that this supply chain risk designation was unlawful,” the spokesperson said, adding, “We remain focused on working productively with the government to harness AI for our national security so all Americans benefit from this technology.”
The company has said its goal in filing the lawsuits was never to force the Pentagon back to the negotiating table. It just wanted the status quo restored to what it was before the designation.
As judges join the parade of government officials and corporate executives attempting to gain control of the AI race, Breitbart News social media director Wynton Hall has written his instant bestseller Code Red: The Left, the Right, China, and the Race to Control AI to serve as the definitive guide on how the MAGA movement can create positions on AI that benefit humanity without handing control of our nation to the leftists of Silicon Valley or allowing the Chinese to take over the world.
Read more at CNBC here.
Lucas Nolan is a reporter for Breitbart News covering issues of AI, free speech, and online censorship.