Two weeks ago, Anthropic was a major Pentagon contractor. Now the company is fighting for its right to do business with the entire federal government, and the White House says it might not be done punishing them.
The Trump administration has refused to rule out additional action against Anthropic, according to reporting from Wired, even as the company's two federal lawsuits challenging the government's campaign against it await their first major court tests. A new executive order to formally "eradicate Anthropic from the federal government" is reportedly under consideration.
How We Got Here
The timeline moves fast. In late February, the Pentagon demanded that Anthropic remove contractual restrictions on how the military could use Claude. Specifically, the Defense Department wanted the ability to deploy Claude for mass surveillance of Americans and for fully autonomous weapons systems. Anthropic said no.
The retaliation was swift. On February 27, President Trump ordered all federal agencies to stop using Anthropic's technology, posting on Truth Social: "We don't need it, we don't want it, and will not do business with them again!" Defense Secretary Pete Hegseth went further, designating Anthropic a "supply chain risk" - a national security label that doesn't just block government contracts but pressures every company that does business with the military to cut ties with Anthropic too.
The president gave agencies with deeper Anthropic integrations, like the DoD, six months to phase out their usage, but paired the deadline with a threat: "Anthropic better get their act together, and be helpful during this phase out period, or I will use the Full Power of the Presidency to make them comply, with major civil and criminal consequences to follow."
Anthropic Fights Back in Court
On March 9, Anthropic filed two lawsuits. One in U.S. District Court for the Northern District of California challenges the supply chain risk designation. A second, filed in the federal appeals court in Washington, D.C., targets the presidential directive itself. Both allege the administration is illegally retaliating against Anthropic for exercising its First Amendment rights by choosing how its technology can be used.
Anthropic's legal filings describe the government's actions as "unprecedented and unlawful" and warn they could cost the company "hundreds of millions of dollars" in revenue. An Anthropic spokesperson said the lawsuit was "necessary" to protect the business, its customers, and its partners.
Legal experts aren't giving the administration great odds. Michael Endrias and Alan Z. Rozenshtein, who have analyzed the case, called the supply chain risk designation "political theater," noting that the government undermines its own emergency claims by planning a leisurely six-month technology phaseout. If Claude posed an actual supply chain risk, you wouldn't give yourself half a year to stop using it.
The Bigger Picture for AI Companies
The timing of what happened next tells you everything. The same day Trump banned Anthropic, OpenAI announced a Pentagon deal. The message to the AI industry is clear: cooperate with military demands without conditions, or watch your competitor take your contracts.
This creates a genuine dilemma for every AI company that has published responsible use policies. Those policies looked good in press releases. Now there's a price tag attached to keeping them. Anthropic drew a line at mass surveillance and autonomous weapons. The government's response was to try to destroy the company's federal business.
The court battles will test whether the executive branch can use supply chain risk designations - a tool designed for actual security threats from foreign adversaries - as a punishment for a domestic company's product decisions. If the courts side with the administration, every AI company's terms of service become negotiable the moment a government contract is on the table.
Anthropic isn't a small startup that can absorb this quietly. The company was valued at $61.5 billion in its last funding round and has significant government revenue at stake. But the White House's refusal to rule out further action suggests the administration views this as a fight worth escalating, regardless of what happens in court.