The feud between the federal government and Anthropic escalated Monday when the artificial intelligence (AI) company sued the Trump administration over its decision to label the firm a “supply chain risk,” arguing the designation – and the resulting ban on its technology – was unlawful.
Anthropic filed two federal lawsuits – one in the U.S. District Court for the Northern District of California and another in the federal appeals court in Washington, D.C. – alleging the Trump administration violated its First Amendment rights and exceeded the legal scope of the supply chain risk statute.
The company is seeking a federal injunction to prevent defense officials from enforcing the blacklist designation.
The lawsuit follows an ongoing dispute between the Department of Defense (DOD) – rebranded as the Department of War by the Trump administration – and Anthropic, over the company’s refusal to allow its models to be used for mass domestic surveillance or in fully autonomous weapons.
“The Constitution does not allow the government to wield its enormous power to punish a company for its protected speech. No federal statute authorizes the actions taken here,” the lawsuit reads.
Anthropic’s clash with the DOD
The dispute began last month when the DOD and Anthropic began to clash over the company’s policies limiting certain uses of its Claude AI model.
After days of negotiations, the DOD issued an ultimatum to Anthropic, directing the company to allow the Pentagon access to Claude without restrictions for all lawful purposes.
Anthropic CEO Dario Amodei responded, saying the company understands that the DOD, not private businesses, makes military decisions and that it has not attempted to limit the use of its technology in an “ad hoc manner.” However, in a narrow set of cases, he believed that “AI can undermine, rather than defend, democratic values.”
Anthropic and DOD had until Feb. 27 at 5 p.m. to reach a deal.
But just over an hour before the deadline, President Donald Trump ordered all federal agencies to “IMMEDIATELY CEASE all use of Anthropic’s technology,” closing the door to any further negotiations.
Federal agencies soon began to offboard Anthropic technology from their systems following the president’s order. It remains unclear how long the offboarding process will take across the federal government, but the president said there will be a six-month phaseout period for agencies “who are using Anthropic’s products, at various levels.”
Anthropic claimed that to date, the General Services Administration has terminated its “OneGov” contract, ending the availability of Anthropic services to all three branches of government. The Department of the Treasury and the Federal Housing Finance Agency publicly announced they were cutting ties with Anthropic. The State Department and Department of Health and Human Services reportedly circulated internal memoranda directing employees to stop using Anthropic services.
Within hours of the president’s order, Defense Secretary Pete Hegseth directed the DOD to classify Anthropic as a supply chain risk to national security – banning contractors, suppliers, or partners from doing business with the United States military if involved in any commercial activity with Anthropic.
Anthropic’s legal case against the government
Anthropic’s lawsuits lay out several key allegations against the government.
First, it claims the government misused a defense supply chain law – 10 U.S.C. § 3252 – turning a narrow national security tool into a broad blacklist to punish the company for refusing to allow certain military and surveillance uses of its AI technology.
Second, the company says federal agencies also violated the Administrative Procedure Act (APA) by acting arbitrarily, without following proper procedures, and beyond the authority granted to them, imposing sanctions that were not authorized by law.
Third, Anthropic claims its First Amendment rights were violated because the government retaliated against the company for expressing its views on AI safety and the limitations of its technology. Fourth, Anthropic claims the president’s directive is illegal because he lacks the authority from Congress to issue such an order.
Lastly, the company claims that these actions violate its Fifth Amendment rights because they deprived Anthropic of property and business interests – including its reputation, existing contracts, and future opportunities – without due process.
As a result, Anthropic says the government’s actions have caused immediate, far-reaching, and irreversible harm, threatening its revenue, partnerships, and ability to contribute to public debate on the safe and responsible use of AI in areas like warfare and surveillance.
“Absent judicial relief, those harms will only compound in the weeks and months ahead,” the lawsuit reads.
Tech employees respond
Employees across the tech industry have voiced strong reactions to the government’s actions against Anthropic.
Anthropic gained some early backing in its California district court challenge from OpenAI and Google employees, who filed an amicus brief supporting the company’s request. That coalition of AI engineers, researchers, scientists, and professionals called the designation of Anthropic as a supply-chain risk “an improper and arbitrary use of power that has serious ramifications for our industry.”
Prior to the lawsuit, another coalition of tech employees signed an open letter urging the DOD to withdraw its designation of Anthropic as a supply chain risk to national security. The signatories said they “strongly believe the federal government should not retaliate against a private company for declining to accept changes to a contract.” They warned the situation “sets a dangerous precedent.”
The federal government has yet to formally respond to the legal action.