A federal judge ruled on August 28, 2026, that the Trump administration’s designation of Anthropic as a supply chain risk was illegal, handing the AI company its first court victory in an ongoing dispute with the Pentagon.
U.S. District Judge Rita Lin, presiding in California, found that Defense Secretary Pete Hegseth’s labeling of Anthropic as a national security threat constituted “unlawful retaliation” in violation of the First Amendment. Lin also ruled the decision was “arbitrary and capricious” and that Anthropic was denied due process under the Fifth Amendment.
The conflict began when Hegseth and President Donald Trump designated Anthropic a supply chain risk earlier in 2026, ordering all federal agencies — including those outside of defense — to stop working with the maker of the Claude AI models. The designation stemmed from Anthropic’s refusal to remove safety guardrails that would have allowed the Pentagon to use its models for fully autonomous weapons and mass surveillance of American citizens. The Pentagon denied it intended to use Anthropic’s models for unlawful purposes and argued Anthropic was attempting to control how the military used technology it had purchased.
In her ruling, Lin noted that the government’s “words and deeds confirm that the challenged actions were based on a desire to make a public example out of Anthropic for its ‘arrogance’ in criticizing the government.” She also highlighted contradictions in the government’s position, including Hegseth’s separate proposal to apply the Defense Production Act to Anthropic — which would classify the company as essential to national security — and the Pentagon’s continued pursuit of a contract with the company and collaboration on its Mythos model for cybersecurity.
“The empty invocation of national security is not a blank check to punish and retaliate against government critics,” Lin wrote.
“We welcome the court’s ruling that this supply chain risk designation was unlawful,” an Anthropic spokesperson said. “We remain focused on working productively with the government to harness AI for our national security so all Americans benefit from this technology.”
Anthropic filed two complaints against the Department of Defense in March in California and Washington, D.C. The D.C. lawsuit remains ongoing.
Source: TechCrunch