ICYMI: Developments in Anthropic Challenges to Department of War Supply Chain Risk “Designation”

Federal contractor Anthropic PBC was recently the subject of social media “directives” issued by the President and the Secretary of War that sought to designate the company a supply chain risk following unsuccessful negotiations concerning the intended use of Anthropic’s Claude AI. Below we discuss implications of the dispute between Anthropic and the Department of War (DoW) for other federal contractors.

Background. Anthropic’s Claude has been used in federal contracting since 2024. The company obtained its first direct contract with DoW in 2025 and was later added to GSA’s list of approved vendors. As is common for AI vendors, Anthropic maintains a usage policy that addresses safe and responsible use of its models.  That policy has an addendum adapted for military and intelligence use of the model by the federal government, which carves out “mass domestic surveillance and autonomous weapons.” 

This dispute arose out of negotiations to deploy Claude for use on DoW’s GenAI.mil platform. The Department sought contract terms that would allow the Department to use Claude models for all lawful uses. Anthropic agreed to provide Claude without usage restrictions with two exceptions: Claude would not be used for mass surveillance or autonomous lethal weapons. DoW rejected these limitations, but the parties continued negotiations. During a meeting with Anthropic in late February, Secretary Hegseth stated that if Anthropic would not agree to revised use terms permitting the Department “all lawful uses” of Claude models, DoW might either invoke the Defense Production Act to designate the company as essential to national security or designate the company a “supply chain risk” under other authorities. Anthropic held firm to its position. 

On February 27, the President and Secretary Hegseth posted on social media directing a series of federal actions: (1) the President directed federal agencies to “CEASE all use of Anthropic’s technology,” and (2) Secretary Hegseth directed DoW to designate Anthropic “a Supply-Chain Risk to National Security” and stated “[e]ffective immediately, no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic.” Seemingly in tension with those statements, Secretary Hegseth mentioned that Anthropic would “continue to provide the [DoW] its services for a period of no more than six months to allow a seamless transition” to another technology.  

To date, the Government has not issued an exclusion order related to Anthropic or its products under the Federal Acquisition Supply Chain Security Act (FASCSA) or issued any government-wide instructions to implement the directive in the President’s February 27 social media post.

The Supply Chain Risk Designation Letters and Ensuing Litigation. Anthropic received two letters from DoW on March 4, 2026 (dated the day before) related to the supply chain risk designation. One letter invokes 10 U.S.C. § 3252 (Section 3252), which sets forth authorities and procedures for DoW designations related to supply chain risk, and the other invokes 41 U.S.C. § 4713 (Section 4713), which authorizes supply chain risk designations under the Federal Acquisition Supply Chain Security Act. Anthropic challenged each designation in separate suits – the invocation of Section 3252 in the U.S. District Court for the Northern District of California (N.D. Cal.) and the invocation of Section 4713 in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit).

Section 3252 Litigation Summary. Anthropic filed suit on March 9 in the N.D. Cal., seeking a temporary restraining order and preliminary injunction based on alleged violations of the Administrative Procedure Act (APA), First Amendment, Fifth Amendment, and separation of powers principles. In addition to briefs submitted by Anthropic and the Government, a number of amici, including trade associations and employees in the AI field, also weighed in on the impacts of directives and supply chain risk designation. On March 26, the court granted Anthropic’s motion for a preliminary injunction and enjoined all activities to enforce the Presidential and Hegseth social media directives and the Section 3252 supply chain designation, effective April 2. 

On April 2, the Government appealed the district court’s order entering a preliminary injunction in the Ninth Circuit. The appeal schedule set deadlines for the Government’s opening brief (April 30) and Anthropic’s answering brief (May 28). On April 3, GSA announced that it was restoring Anthropic technology “to the status quo” prior to the government’s implementation of the President’s directive, to include allowing system integrations with Anthropic products, offering Anthropic models in GSA Chat, and making Anthropic’s models available in external-facing services and the GSA Multiple Award Schedule (MAS).

Section 3252 Litigation Takeaways

The Government acknowledged that the supply chain designation does not prohibit DoW contractors from using Anthropic commercially. The hearing on Anthropic’s request for a preliminary injunction provided some clarity around the Government’s position on the use of Anthropic by other government contractors under Section 3252. In the written briefing and the oral argument, the U.S. Department of Justice made the following representations:  

• The supply chain designation would not apply to efforts in which Anthropic is not a formal subcontractor to a DoW prime contractor for a specific effort.
• The directives would not prohibit DoW contractors from using Claude for non-DoW work (such as other federal work or commercially).
• The supply chain designation would not prohibit a DoW contractor from using a Claude model under a general license as a tool to write software for a DoW national security system. DoW could decide that it does not want contractors to use Claude even in this capacity, but such direction would not be pursuant to the present Section 3252 supply chain risk designation.

The court’s opinion on the preliminary injunction motion determined Anthropic had shown a likelihood of success on its First Amendment, Due Process, and APA claims.

The court commented that the directives “appear ... to be classic First Amendment retaliation.” The court stated that:

• DoW’s contracting position was taken to “punish” Anthropic for its “‘ideology’ … ‘rhetoric’ … [and] ‘arrogance’” in the words of President Trump and Secretary Hegseth, “for being unwilling to compromise [its] beliefs.”
• DoW’s actions went far beyond its expressed concern about having complete control over its use of AI, which could be managed through contracting processes.

The court also found that:

• The supply chain designation did not appear to comport with Due Process considerations. The Government had not provided “any meaningful notices or pre-deprivation process” and “no evidence of exigency” in issuing the supply chain risk designation and directing federal agencies and entities that do business with DoW to cut ties with Anthropic. Specifically, the court found that the exigency present in other instances of Section 3252 designations was not present with Anthropic, “a domestic company with a significant federal contracting business.” Further, the court observed that DoW and Anthropic had been doing business under the same terms the Government objects to now for over a year, which cast doubt on the credibility of DoW’s national security concerns without other evidence.
• The supply chain risk designation likely exceeded statutory authority. Specifically, the court determined that Section 3252 “is intended to address the risk of adversarial sabotage of national security systems” and therefore “does not authorize DoW to designate a domestic vendor a supply chain risk simply because the vendor publicly criticized DoW’s views about the safe uses of its system.” And even if Section 3252 could be used for this purpose, the court concluded that DoW did not make a reasoned determination about whether less intrusive measures were available and therefore failed to follow the necessary process for making such a designation.
• Anthropic demonstrated that it had and would suffer irreparable harm. The court was persuaded that the directives and supply chain risk designation caused Anthropic irreparable harm, including a loss of opportunity to pursue its chosen profession, a loss of control over business reputation, and damage to goodwill. The court pointed to the fact that some agencies that directly contract with Anthropic to use its technology or use it through a third party had indicated they would terminate contracts with Anthropic.

Section 4713 Litigation Summary. Anthropic filed a petition for review in the D.C. Circuit of Secretary Hegseth’s social media directive and the DoW supply chain risk designation under Section 4713 and asked the court to stay those orders pending review. On the merits, Anthropic challenges the directives and supply chain risk designation as exceeding authority under FASCSA, depriving Anthropic of Due Process rights, and amounting to retaliation for protected speech. The parties briefed the stay motion, and the court set deadlines in April for procedural motions (April 8), dispositive motions (April 23), and for the Government to file a certified index to the record (April 23).

Anthropic subsequently filed an update with the D.C. Circuit, advising it of the N.D. Cal. court’s decision in the Section 3252 case, which Anthropic argues supports its case for a preliminary injunction in the Section 4713 case.

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Wiley’s Government Contracts,  Privacy, Cyber & Data Governance, and AI practices continue to monitor these developments. As the dispute continues to unfold, government contractors should be watchful for signals from the government and decisions from both the courts that could bear on contracting with DoW or involve the use of Anthropic products and services.