A US federal appeals court has upheld the Pentagon’s decision to designate AI company Anthropic as a supply-chain risk, enabling the government to exclude the company’s Claude AI models from Pentagon systems and contractor work. The 2-1 ruling from the US Court of Appeals for the District of Columbia Circuit, issued on September 25, stemmed from Anthropic’s refusal to lift contractual restrictions that limit Claude’s use for lethal autonomous warfare and domestic surveillance.
How FASCSA Became Central to the Dispute
The case hinges on the Federal Acquisition Supply Chain Security Act of 2018 (FASCSA), which grants the government authority to restrict technology deemed a supply-chain risk. The appeals court majority interpreted the law broadly, concluding that the risk does not require the person or company to be a foreign adversary or act with malicious intent. Instead, the judges found that Anthropic’s usage restrictions could qualify because the Pentagon feared the company might prevent Claude from performing authorized national-security functions.
Anthropic’s AI Safeguards at the Center
Anthropic had sought to maintain limits preventing Claude from being used for fully autonomous weapons and mass domestic surveillance. The company challenged the Pentagon’s designation as unlawful and unconstitutional, but the appeals court rejected those arguments, stating the government had not exceeded its authority under the supply-chain provision. However, the ruling does not automatically blacklist every AI company with ethical restrictions—it applies specifically to Anthropic’s designation and the Pentagon’s concerns about Claude’s integration into its information systems.
Dissent Raises Questions Over the Law
Judge Karen Henderson dissented, arguing that the statutory language should be read in the context of actions like deliberately disrupting or compromising technology already within the federal supply chain. This ruling follows a separate August decision in which a California federal judge blocked another Pentagon designation involving Anthropic, creating two distinct legal tracks around the same broader dispute. The latest decision leaves Anthropic’s FASCSA designation intact and marks a significant legal development in the ongoing debate over how government agencies can regulate and procure advanced AI systems.