Judges appear split as Pentagon battles Anthropic over AI security label

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A panel of judges on the U.S. Court of Appeals for the District of Columbia Circuit appeared divided Tuesday as it weighed the Pentagon’s legal dispute with AI company Anthropic, after the Defense Department designated the company a national security supply-chain risk. The dispute grew out of Defense Secretary Pete Hegseth’s decision, which Anthropic says wrongly branded it as a security threat because the company raised ethical and safety concerns about AI use in war.

During the hearing, judges focused on the standard for how much a court can second-guess a defense secretary’s determination about national security risk. Some judges’ questions suggested they may diverge on whether the government produced enough evidence to justify the designation and whether the court should defer to the secretary’s view of the risk.

Judge Karen LeCraft Henderson said she saw no evidence supporting the Pentagon’s determination that Anthropic poses a supply-chain risk to national security. “To me, this is just a spectacular overreach by the (Defense) Department,” Henderson said, according to the hearing account described in the case reporting.

Judge Neomi Rao, a judge nominated by President Donald Trump, pressed Anthropic’s argument about judicial scrutiny. Rao questioned what basis a court could have for second-guessing Hegseth’s judgment, focusing on the government’s view of risk tied to AI use in fully autonomous weapons and potential surveillance of Americans.

Rao told Anthropic attorney Kelly Dunbar that she understood the secretary as making general points beyond the specific “risk” questions raised in the court. “I take the secretary to be making more general points than the ones that you’ve identified,” Rao told Dunbar, according to the account of the remarks. Rao said the government framed the dispute around trust and embedded issues that could create problems for military capabilities.

The underlying sequence of events began after the Pentagon designated Anthropic as a supply-chain risk and President Trump ordered federal agencies to stop using the company’s technology. Anthropic filed lawsuits after the designation—one in Washington, D.C., and another in San Francisco—arguing the government’s actions illegally retaliated against it by stigmatizing the company in a way intended to protect against sabotage of national security systems by foreign adversaries.

Anthropic told the court that neither lawsuit sought to force the government to contract with it. The company said it had been harmed in an irreparable way by Hegseth’s supply-chain risk designation.

Earlier in the proceedings, the D.C. Circuit rejected Anthropic’s request for a court order that would have blocked the Pentagon’s actions while the appeal was pending. In a separate but related ruling, a federal judge in San Francisco ruled in Anthropic’s favor last month and blocked the Pentagon from labeling Anthropic a supply-chain risk.

As the case moved through the appellate arguments, the government and Anthropic disputed what Anthropic’s role would be once its AI tool is integrated into military networks. In a filing ahead of Tuesday’s hearing, Anthropic said it cannot manipulate Claude once deployed in classified Pentagon military networks.

Justice Department attorney Sharon Swingle argued to the D.C. Circuit that Anthropic could interfere with the Pentagon’s usage of the company’s AI model for critical operations. She said, in the court’s hearing account, that the failure of the model in active military operations could have “catastrophic national-security consequences” and put service members’ lives at risk.

Dunbar, representing Anthropic, argued that Hegseth’s designation violated required procedures and the Constitution. Dunbar said the secretary “defied congressionally mandated procedures, exceeded statutory limits and violated the Constitution,” and she argued the move turned a national security authority toward leverage in a contract dispute.

Judge Gregory Katsas, another jurist on the panel nominated by Trump, also heard arguments. The judges did not signal how soon they would issue a decision.