Court hands the Pentagon a vendor kill switch weeks before Anthropic's $2 trillion IPO

A refusal, ruled a risk

A divided US Court of Appeals for the District of Columbia Circuit ruled 2-1 on Friday that the Pentagon had "ample support" to blacklist Anthropic as a supply chain risk under a 2018 statute aimed at hostile firms tied to foreign adversaries ¹³. Because Anthropic openly programs Claude to refuse certain tasks, Judge Gregory Katsas wrote for the majority, the manipulation the law fears is a "certainty" ²³. The panel had "no reason to doubt" Anthropic's "noble intentions"; the statute turns on "what Anthropic does, not why" ².

That holding travels. Politico↗ calls this the first appellate reading of the 2018 designation power, extended to US companies because the statute reaches a risk that "any person may sabotage": authority to bar domestic vendors "based on their internal ethical or product safety limitations" ³. That is the kill switch, court-tested: no malice required, only a product built to refuse. Refusing to build the weapon is, under this law, the security risk.

The contract fight became a revenue hole

The fight grew from a roughly $200 million deal to run Claude on military work ⁹. Defense Secretary Pete Hegseth insisted the contract allowed "all lawful use"; Anthropic refused two uses, lethal autonomous weapons and mass domestic surveillance ⁹. In March he designated Claude a supply chain risk, cancelling the military contracts and barring Pentagon contractors from its products ⁴⁵. Anthropic answered with two lawsuits on 9 March↗ ¹.

The label reaches the Pentagon and its contractors, not the rest of the federal government ². Anthropic says the blacklisting has cost billions in lost business, a company-claimed figure with no number attached, and damaged its reputation weeks before an October Nasdaq listing that targets about $2 trillion↗ ⁴⁷.

Two courts, opposite answers

On 27 August, Judge Rita Lin in California vacated the parallel designation↗ as "unlawful retaliation in violation of the First Amendment," a permanent injunction lifting penalties across nine agencies ⁸⁹¹⁰. "The empty invocation of national security is not a blank check to punish and retaliate against government critics," she wrote ⁸.

The department kept the label anyway: Undersecretary of War Emil Michael confirmed on 3 September↗ that Anthropic "is still a designated Supply Chain Risk" for the department and its industrial base ¹⁰. The DC panel reconciled the rulings on text, "an adversary" versus "any person," with bad motive not required under the 2018 law ³. Anthropic's First Amendment claim failed on the same ground: the exclusion turned on contract terms, not speech ¹.

The military's fear is not imaginary

Claude had been running inside classified and sensitive systems, including the January operation that captured Venezuelan leader Nicolás Maduro ⁴⁵. Katsas closed by placing the balance with "the President and the Secretary of War," not the vendor ³. Pentagon spokesman Sean Parnell said the ruling "completely validates the Department's position" ².

En banc, the Court, or the S-1

Anthropic is "considering all options, including further review": in practice, the full DC Circuit or the Supreme Court ²³. The public prospectus still had not reached EDGAR as of 26 September↗, four months after the confidential 1 June draft ⁶.

No source names which vendors inherit the classified workloads Claude was running, and the lost billions carry no figure. Whoever buys this listing underwrites the refusals along with the revenue.