A federal appeals court in Washington DC today rejected Anthropic PBC’s request for a stay in its lawsuit against the Department of Defense.

A panel of three judges said the artificial intelligence company had failed to meet the strict requirements for an emergency stay in the case.

Anthropic has sued the DOD in two separate lawsuits after the Pentagon designated the company as a supply chain risk. In a separate but related case last month, a judge in San Francisco granted Anthropic a preliminary injunction temporarily blocking the supply chain risk designation. “Nothing in the governing statute supports the Orwellian notion that an American company may be branded a potential adversary and saboteur of the U.S. for expressing disagreement with the government,” said Judge Rita F. Lin.

Of the decision today, the panel wrote, “In our view, the equitable balance here cuts in favor of the government.” It added, “On one side is a relatively contained risk of financial harm to a single private company. On the other side is judicial management of how, and through whom, the Department of War secures vital AI technology during an active military conflict.”

The disagreement began earlier in the year during failed negotiations over a $200 million contract. The dispute centered on Anthropic’s reluctance to allow the DOD to use its Claude system “for all lawful purposes.” The company warned that such vague language could open the door to uses it opposes, including mass surveillance of U.S. citizens or autonomous weapons systems.

With the courts divided, Anthropic is temporarily excluded from Pentagon deals but not from the wider government. Contractors are barred from using Claude in Defense Department work, though it remains permitted in non-DOD projects.

The panel acknowledged that Anthropic “will likely suffer some degree of irreparable harm absent a stay,” but added that the company’s interests seemed “primarily financial in nature.” In relation to Anthropic’s contention that the ban impinged on its right to free speech to criticize the government, the panel wrote, “Anthropic does not show that its speech has been chilled during the pendency of this litigation.”

Though this is a setback for Anthropic, a spokesperson said the company is “confident the courts will ultimately agree that these supply chain designations were unlawful.”

Todd Blanche, the acting U.S. attorney general, writing on X, called today’s decision a “resounding victory for military readiness.” He added, “Our position has been clear from the start — our military needs full access to Anthropic’s models if its technology is integrated into our sensitive systems.”

Image: Anthropic