D.C. Circuit Lets Pentagon Exclude Anthropic's Claude, 2-1

What the Court Decided

On September 25, 2026, a divided panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled 2-1 that the Department of War, the renamed Department of Defense, acted lawfully when it excluded Anthropic's Claude models from its supply chain under the Federal Acquisition Supply Chain Security Act of 2018. Circuit Judges Gregory Katsas and Neomi Rao formed the majority, with Katsas writing the opinion; Circuit Judge Karen Lecraft Henderson dissented. The court denied Anthropic's petitions for review in case No. 26-1049, consolidated with No. 26-1162, meaning the Department's exclusion of Claude stands.

The case traces to a decision by the Department, still called the Department of Defense at the time, to exclude Claude from its supply chain after Anthropic refused to relax contractual restrictions barring the use of Claude for lethal autonomous weapons and domestic mass surveillance. Anthropic argued the exclusion was arbitrary, unauthorized by statute, and unconstitutional under the First and Fifth Amendments. The panel rejected all three arguments and denied the petitions for review.

The Statutory Argument

The Department's authority came from 41 U.S.C. Section 4713, part of the Federal Acquisition Supply Chain Security Act, which lets an agency head bar contracts with a supplier found to pose a "supply chain risk," defined broadly as the risk that "any person" may "sabotage, maliciously introduce unwanted function, extract data, or otherwise manipulate" a covered product so as to "surveil, deny, disrupt, or otherwise manipulate" its function. The majority held that Anthropic's own admitted practice, building restrictions into Claude that block certain government-requested tasks, fits that definition, particularly the statute's use of the word "deny." The opinion states: "As Anthropic admits, the company encodes restrictions into Claude that prevent the model from performing tasks that Anthropic wishes to prevent. On more than one occasion, these restrictions have stopped Claude from performing tasks requested by government users. And recently, a dispute arose over whether the contractual prohibitions barred the use of Claude in an ongoing overseas military operation, leaving the Department uncertain whether Claude would perform as needed and intended."

Anthropic also pointed to a separate ruling in its favor: on August 27, 2026, U.S. District Judge Rita Lin in the Northern District of California had already vacated a different Pentagon designation of Anthropic as a "supply chain risk," made under a narrower statute, 10 U.S.C. Section 3252, which requires that an "adversary" act with intent such as sabotage. The D.C. Circuit panel expressly said it had "no quarrel" with Lin's finding that Anthropic acted with no such bad motive, but held that finding does not control this case: Congress gave the D.C. Circuit exclusive jurisdiction to review actions taken under Section 4713, a broader provision covering "any person" without requiring bad motive, so the two rulings stand side by side rather than one overriding the other.

Constitutional Claims Rejected

The panel also rejected Anthropic's due-process and First Amendment claims. On due process, the court found the Department "promptly notified the company of the exclusion and its supporting rationale, and then gave the company a fair opportunity to contest the exclusion." On the First Amendment, the majority held the exclusion rested on "the company's refusal to assent to a contract term that the Department deemed essential, not... the company's support for greater governmental regulation of AI technology," characterizing it as a contractual dispute rather than retaliation for speech.

The panel closed by framing the case as a policy tradeoff for elected officials, not judges, to resolve: "the Secretary raises the deeply sobering prospect of overly constrained AI models shutting down unexpectedly and thus causing important military operations to fail. Anthropic raises the deeply sobering prospect of unconstrained AI models hallucinating inappropriate targets for lethal military force... it is the President and the Secretary of War who must determine how best to balance the competing risks."

The Dissent

Judge Henderson disagreed with the majority's reading of Section 4713's definition of "supply chain risk." She argued the statute's verbs, even under the broader definition, target conduct that covertly impedes or eavesdrops on a product after it enters the government's supply chain, not "a contractor's honest and upfront enforcement of restrictions on a covered article's use disfavored by the government." Her dissent reads the statute's legislative history as aimed at concealed threats from hostile actors, not a vendor's disclosed contractual limits.

What Comes Next

An Anthropic spokesperson said the company "respectfully disagree[s] with the court's decision," noting that "another federal court has already held the government's parallel designation unlawful," and said Anthropic is "considering all options, including further review," meaning the company could seek en banc rehearing before the full D.C. Circuit or petition the U.S. Supreme Court. The ruling does not disturb Judge Lin's separate August 27 vacatur, so the practical result is a split outcome: Anthropic's Section 3252 designation stays vacated, while its Section 4713 exclusion stands, unless one side successfully appeals further.

Pros and Cons

Pros

• The ruling gives the Department of War a clear statutory basis for excluding a vendor whose contractual use restrictions it judges to be a supply chain risk, reducing legal uncertainty in procurement.
• The panel's due-process finding sets a marker that a covered company must get a genuine notice and hearing before an exclusion, not just a summary designation.
• The dissent's narrower reading of "supply chain risk" is preserved on the record, giving Anthropic a concrete argument to raise on further appeal.
• The opinion says it has "no quarrel" with the Northern District's Section 3252 conclusions, leaving that earlier win for Anthropic undisturbed.

Cons

• a 2-1 panel split on the core statutory question means the outcome could still change if Anthropic wins en banc rehearing or Supreme Court review.
• the ruling accepts that a vendor's disclosed, non-malicious use restrictions can count as a "supply chain risk," a reading Judge Henderson's dissent says stretches the statute's text.
• Anthropic remains excluded from the Department of War's supply chain under Section 4713 even though a different federal court found a related designation of the company unlawful.
• the decision does not resolve the underlying dispute over autonomous-weapons and domestic-surveillance restrictions that triggered the original contract breakdown.

Outlook

The ruling hands the administration a legal win in one of two parallel fights over the same underlying dispute, while leaving Anthropic's win in the other case intact. Because Congress gave the D.C. Circuit exclusive jurisdiction over Section 4713 procurement actions, this ruling cannot simply be appealed to a different circuit court; Anthropic's remaining options are a request for en banc rehearing or a petition to the Supreme Court, either of which would take months to resolve. In the meantime, the split outcome leaves the Department of War able to enforce its Section 4713 exclusion of Claude even as a separate Section 3252 designation of the same company remains vacated, an outcome that turns as much on which statute a challenge is filed under as on the underlying facts.

Conclusion

This is not a reversal of Anthropic's August win against the Pentagon; it is a loss in a separate, parallel case decided under a different, broader statute that Congress routed exclusively through the D.C. Circuit. The panel's 2-1 decision lets the Department of War's exclusion of Claude stand, on the theory that a vendor's own disclosed restrictions on lawful military uses can qualify as a "supply chain risk." For anyone tracking how courts are drawing the line between a company's contractual choices and a national-security designation, the coexistence of a vacated designation in one court and an upheld exclusion in another is the clearest illustration yet of how unsettled that line currently is.

Editor's Verdict

D.C. Circuit Lets Pentagon Exclude Anthropic's Claude, 2-1 is a workable proposition that fills a clear gap, even if it doesn't fundamentally change the landscape.

The strongest case for paying attention: the ruling gives the Department of War a clear statutory basis for excluding a vendor whose contractual use restrictions it judges to be a supply chain risk, reducing legal uncertainty in procurement. That alone raises the bar for what readers should expect in this space. Reinforcing that, the panel's due-process finding sets a marker that a covered company must get a genuine notice and hearing before an exclusion, not just a summary designation — practical value rather than just headline appeal. The broader signal worth registering is straightforward: the ruling does not overturn Anthropic's separate August win in California; it applies to a different designation reviewed under a broader statute that only the D.C. Circuit may hear. On the other side of the ledger, one constraint is real rather than a marketing footnote: a 2-1 panel split on the core statutory question means the outcome could still change if Anthropic wins en banc rehearing or Supreme Court review. It should factor into any serious decision. Layered on top of that, the ruling accepts that a vendor's disclosed, non-malicious use restrictions can count as a "supply chain risk," a reading Judge Henderson's dissent says stretches the statute's text — which narrows the set of teams for whom this is an obvious yes.

For Anthropic and Claude users, alignment-focused teams, and developers already invested in the Claude ecosystem, the smart move is to track its trajectory and revisit once the rough edges are filed down. For everyone else, the safer posture is to monitor coverage and revisit once the use cases that matter to your team are demonstrated in the wild.