The Pentagon can exclude Claude from its defense supply chain under the D.C. Circuit Court of Appeals’ September 25, 2026, ruling. The panel’s 2–1 decision gives the government a significant victory in its dispute with Anthropic over restrictions on military use of the AI models.
But the decision addresses only one part of the legal fight. A federal judge in California reached a different conclusion in August about a parallel designation under a separate law. That distinction explains how Anthropic could win there and still face restrictions on Pentagon work.
A defense partnership breaks over usage limits
Anthropic announced its Pentagon agreement in July 2025: a two-year arrangement to develop AI capabilities, with a spending ceiling of $200 million. That figure represented the maximum value of the agreement, rather than guaranteed revenue.
The relationship ran into a dispute over permitted uses. Anthropic maintained restrictions on mass surveillance of Americans and fully autonomous weapons. The Pentagon sought authorization for all lawful uses, terms the company declined to accept.
The Pentagon’s formal supply-chain determination dates to March 3, 2026. Anthropic challenged the action that month. The restrictions covered the department’s own use of Claude and contractors’ use of Anthropic products for Pentagon work.
Why the courts reached different conclusions
The appeals panel considered the government’s authority under the Federal Acquisition Supply Chain Security Act of 2018, known as FASCSA. The majority concluded that restrictions built into Claude could qualify as a supply-chain risk under that law. It pointed to instances in which the model had declined tasks requested by government users.
That was the majority’s assessment of the statutory risk, a conclusion Anthropic disputed. Dissenting Judge Karen LeCraft Henderson also rejected the majority’s interpretation of the law.
Anthropic challenged the process used to impose the restrictions, including the timing of notice. The majority concluded that the company had not shown prejudice from the delayed notice after receiving an opportunity to contest the designation.
The California case involved a different authority, established through the 2011 National Defense Authorization Act. In her August 27 ruling, U.S. District Judge Rita Lin found that the designation and broader directives before her were unlawful.
The September decision therefore leaves a separate legal basis for the Pentagon’s restrictions intact. It does not amount to a reversal of the California judgment.
What the ruling means for Claude users
For defense contractors, the relevant distinction is whether Claude is being used to perform Pentagon work. The exclusion at issue covers that work; it does not impose a blanket prohibition on every unrelated use of Claude by a company that also holds defense contracts.
Anthropic could seek further review, including a rehearing in the D.C. Circuit or review by the Supreme Court. Those possibilities do not establish that another court will hear the case or change the outcome.
The immediate consequence is narrower: Anthropic’s separate California victory does not, by itself, clear Claude for a return to the Pentagon’s supply chain.
