Artificial intelligence company Anthropic has formally announced it will challenge in court the US Department of Defense's unprecedented decision to designate the company a "supply chain risk to national security" - a label historically reserved for foreign adversaries - as CEO Dario Amodei simultaneously signals that dialogue with the Pentagon has not entirely collapsed.
The conflict escalated sharply last week, when President Donald Trump directed all federal agencies to immediately cease using Anthropic's technology, and Defense Secretary Pete Hegseth announced on social media that he was designating Anthropic a supply chain risk. In his post, Hegseth declared, "Effective immediately, no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic."
The DoD formally notified Anthropic's leadership of the official designation on March 5 - six days after Hegseth's social media announcement, which on its own did not carry legal force. The formal declaration now requires defense vendors and contractors to certify that they are not using Anthropic's models in their work with the Pentagon.
It marks the first time in US history that an American company has been publicly designated a supply chain risk - a label previously applied only to foreign entities considered hostile to U.S. national security.
Anthropic's legal challenge
Within hours of the formal notification, Anthropic made clear it intends to fight the designation. "We do not believe this action is legally sound, and we see no choice but to challenge it in court," the company said in an official blog post on Thursday.
In a public statement, CEO Dario Amodei outlined the legal basis Anthropic plans to rely on. He argued that the relevant statute - 10 U.S.C. § 3252 - is narrow in scope and exists to protect the government, not to punish a contractor. Crucially, Amodei noted, the law requires the Secretary of Defense to use the least restrictive means necessary to accomplish the goal of protecting the supply chain.
"Even for Department of War contractors, the supply chain risk designation doesn't - and can't - limit uses of Claude or business relationships with Anthropic if those are unrelated to their specific Department of War contracts," Amodei wrote.
Legal experts have echoed these concerns. Tess Bridgeman, a former National Security Council attorney and co-editor-in-chief of Just Security, wrote that "it would seem highly unlikely the Secretary can meet the statutory requirements" for the designation, noting that both parties have acknowledged the breakdown stemmed from a contract dispute over terms of use - not adversarial risks to DoD systems. The statute also requires the Pentagon to have exhausted all alternative, less intrusive courses of action before making such a finding.
The root of the dispute
The standoff centers on two conditions Anthropic insisted on before allowing the military unrestricted access to its Claude AI models: that the technology not be used for mass domestic surveillance of Americans, and that it not be used to power fully autonomous weapons - those capable of selecting and engaging targets without human oversight.
In his official statement on Anthropic's website, Amodei explained the company's position on autonomous weapons, "Today, frontier AI systems are simply not reliable enough to power fully autonomous weapons. We will not knowingly provide a product that puts America's warfighters and civilians at risk."
The Pentagon, for its part, demanded the ability to use Claude for "any lawful purpose" without those explicit carve-outs written into the contract. Hegseth accused Anthropic of trying to "seize veto power over the operational decisions of the United States military," calling the company "sanctimonious" and "arrogant."
Anthropic had been the first AI lab to integrate its models into mission workflows on classified networks, operating under a $200 million contract signed with the DoD in July 2025. Even as the dispute was unfolding, the Pentagon continued using Claude to support U.S. operations.
CEO says Pentagon conversations are happening
Despite the legal confrontation, Amodei has been careful to keep the door open to a negotiated resolution. Speaking to investors at the Morgan Stanley Technology, Media and Telecom Conference in San Francisco, Amodei said Anthropic is still in talks with the Pentagon "to try to deescalate the situation." He told the audience that Anthropic and the Department of Defense "have much more in common than we have differences," and stated that the company had "never questioned specific military operations."
Multiple outlets, including Bloomberg and the Financial Times, subsequently reported that Amodei had resumed direct talks with Emil Michael, the Under Secretary of Defense for Research and Engineering, in what appears to be a last-ditch effort to find common ground.
In his formal statement, Amodei reiterated: "I would like to reiterate that we had been having productive conversations with the Department of War over the last several days, both about ways we could serve the Department that adhere to our two narrow exceptions, and ways for us to ensure a smooth transition if that is not possible."
According to reporting from The Washington Today, the Pentagon has reportedly offered to accept Anthropic's terms if the company agreed to remove a specific clause relating to "analysis of bulk acquired data" - the scenario Anthropic was most concerned about.
