D.C. Circuit Upholds Pentagon Ban on Anthropic's Claude

The two courts diverged because the dispute is governed by two separate statutes. Friday's decision turned on a 2018 law, while last month's ruling turned on another.

Anthropic won a $200 million contract last July to provide the Pentagon with access to Claude models. The company and the Defense Department soon began discussing an expansion of their partnership that would have made Claude available through a platform called GenAI.mil.

Anthropic's user agreement prohibits customers from using Claude to conduct mass surveillance of Americans or to build autonomous weapons. The Pentagon sought to replace the relevant clause with a provision permitting "all lawful uses." Anthropic declined to make the change, and Hegseth banned Claude in June. The model series became inaccessible not only to Pentagon staffers but also to defense contractors. Anthropic filed its appeal shortly afterward.

The D.C. Circuit reviewed whether the Pentagon could ban Claude under the 2018 Federal Acquisition Supply Chain Security Act, which enables the defense secretary to block a supplier whose technology poses a national security risk. The court found that the Pentagon had "ample support for" designating Claude as such a risk, a conclusion motivated by Anthropic's model usage restrictions.

"The company encodes restrictions into Claude that prevent the model from performing tasks that Anthropic wishes to prevent," the ruling reads. "On more than one occasion, these restrictions have stopped Claude from performing tasks requested by government users."

FASCSA sets out rules for how supplier bans may be implemented, including a requirement that the Pentagon notify a supplier before blocking it and disclose the reasons for the decision. Anthropic argued that the Defense Department had failed to complete the process in the required manner, but the court did not accept its reasoning.

"We respectfully disagree with the court's decision," Anthropic said in a statement. "Another federal court has already held the government's parallel designation unlawful. We remain confident in our position and are considering all options, including further review."

The August ruling that ordered the Pentagon to lift its ban was issued by the U.S. District Court for the Northern District of California. The judge presiding over the case determined that the move is illegal under the 2011 National Defense Authorization Act, which sets forth different requirements for supplier bans than FASCSA does.

With both courts now having ruled, multiple appeal paths are open to Anthropic. It can seek a rehearing by either the same three-judge panel that issued Friday's decision or the full D.C. Circuit Court of Appeals. According to CNBC, Anthropic could also refer the case to the U.S. Supreme Court.