The Pentagon violated Anthropic’s First Amendment rights when it designated Anthropic as a “supply chain risk” earlier this year, according to District Judge Rita Lin in a ruling last week. Lin found the designation also denied Anthropic due process, and ordered the Pentagon to remove it.
Quick Backstory: Anthropic had been working with the Department of Defense under a contract that included guardrails preventing its AI from being used for mass surveillance of Americans or fully autonomous weapons systems. The DOD pushed back, arguing it should be able to use AI for any “lawful” purpose without restrictions imposed by a private contractor, and when Anthropic refused to remove those limits, the Pentagon labeled the company a “supply-chain risk,” which is a designation typically reserved for foreign adversaries like China.
The Trump administration ordered all federal agencies to cease using Claude and begin a six-month phaseout, after which OpenAI immediately stepped in to sign a deal with the DOD to fill the gap faster than your ex-wife’s “best guy friend” after the divorce.
In response, Anthropic filed two federal lawsuits challenging the designation and contract cancellations, arguing the Pentagon exceeded its authority and was retaliating against the company, which it definitely was. Anthropic warned that the moves could cost it billions of dollars in 2026 revenue, citing specific contracts already being paused or reduced by private sector clients spooked by the designation.
Flash forward to last week and Anthropic won its first case against the Pentagon.
Judge Lin wrote:
“The empty invocation of national security is not a blank check to punish and retaliate against government critics… Though the Department of War is undisputedly free to select the AI vendor of its choice, the evidence demonstrates that the broad measures imposed on Anthropic were illegal and baseless.”
The decision supports her earlier opinion in March when she called the designation “classic illegal First Amendment retaliation.”
The ruling wraps up Anthropic’s suit in Northern California, but the company still has a separate petition pending before a federal appeals court in Washington DC challenging a second designation, with no ruling date announced.
