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A federal appeals court panel in Washington, D.C., upheld the Pentagon’s blacklisting of Anthropic on Friday, handing the artificial intelligence company a significant defeat in its clash with the Trump administration. The ruling rejected Anthropic’s challenge to restrictions involving its Claude models.

A majority of two judges concluded that the Department of War’s ban was not arbitrary, unauthorized or unconstitutional. Judge Gregory Katsas wrote the majority opinion for the U.S. Court of Appeals for the District of Columbia, joined by Judge Neomi Rao.

“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,” Katsas wrote.

Katsas and Rao were appointed by President Donald Trump. Judge Karen LeCraft Henderson, who was appointed by former President George H.W. Bush, dissented from the ruling.

The DoW labeled Anthropic a supply chain risk in March after negotiations over military use of Claude deteriorated. The designation bars the U.S. military from using Anthropic’s models and prevents defense contractors from using them in work conducted with the agency.

The conflict followed negotiations over how broadly the military could deploy Anthropic’s technology. Anthropic’s relationship with the Trump administration has remained strained, with Trump repeatedly criticizing CEO Dario Amodei on social media.

Anthropic filed lawsuits against the Trump administration in U.S. District Court in San Francisco and in the D.C. Circuit Appeals Court in March. The company sought to overturn its blacklisting through challenges to two separate designations relied upon by the DoW.

Because the department used two distinct designations to support the supply chain risk action, the disputes proceeded in separate courts. A federal judge in San Francisco ruled last month that one designation was illegal, while Friday’s appellate decision upheld the other.

“We respectfully disagree with the court’s decision,” an Anthropic spokesperson told CNBC 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 appellate panel delayed the decision from taking immediate effect, giving Anthropic time to pursue another round of review. The company may petition the same panel for a rehearing or seek an en banc rehearing before all judges on the D.C. Circuit Court of Appeals.

Anthropic could also ask the Supreme Court to hear the case. The delay leaves the company with additional legal avenues even as the ruling preserves the challenged designation.

Before the dispute became public, Anthropic had served as an early partner across several U.S. agencies, including the DoW. The company signed a $200 million contract with the Pentagon in July 2025, but negotiations later broke down over Claude’s planned deployment on the DoW’s GenAI.mil artificial intelligence platform.

Those talks began in September 2025. The DoW sought unfettered military access to Anthropic’s models for all lawful purposes, while Anthropic wanted assurances that its technology would not be used for fully autonomous weapons or domestic mass surveillance.

The parties failed to reach an agreement. War Secretary Pete Hegseth accused Anthropic of attempting to “to seize veto power over the operational decisions of the United States military.”

Katsas wrote that Hegseth had raised the “deeply sobering” possibility that “overly constrained” artificial intelligence models could unexpectedly shut down. He also cited the possibility that Claude might be “subject to manipulation,” although Anthropic disputed those claims.

The majority concluded that authority over those competing concerns belonged to Trump and Hegseth. “In our Republic, it is the President and the Secretary of War who must determine how best to balance the competing risks,” Katsas wrote. “In doing so here, the Secretary did not transgress any limits on his authority under the Supply Chain Security Act or the Constitution.”

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