Appeals court allows Pentagon to label Anthropic a national security risk

• The Trump administration can blacklist AI firm Anthropic from all Pentagon contracts, a federal appeals court ruled Friday.
• The D.C. Circuit Court of Appeals ruled 2-1 in favor of the Defense Department.
• The decision establishes sweeping authority for the executive branch to tag companies with the "supply chain risk" label.

The Trump administration can blacklist AI firm Anthropic from all Pentagon contracts, a federal appeals court ruled Friday, in a decision that expands the executive branch's authority to designate US businesses as national security risks.

The D.C. Circuit Court of Appeals ruled 2-1 that the Defense Department had good reason to conclude that the company's artificial intelligence products pose a supply chain risk to the department and its contractors because the company includes code in its models that restricts them from performing certain tasks. Anthropic has said that it will not allow its products to be used for autonomous weapons or mass domestic surveillance.

"The Department had ample support for its conclusion that the continued integration of Claude into the Department's information systems, by the Department or its contractors, presented a statutorily covered national-security risk," the court wrote. "As Anthropic admits, the company encodes restrictions into Claude that prevent the model from performing tasks that Anthropic wishes to prevent."

The decision establishes sweeping authority for the executive branch to effectively tag foreign-owned and US companies with the "supply chain risk" label — a move that Anthropic has said will cause it significant "reputational stigma" and cost it hundreds of millions of dollars in revenue.

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