A US appeals court upheld on Friday the Pentagon's decision to exclude Anthropic from its supply chain, a decision taken when the AI startup refused to remove certain safeguards on its Claude model.

The conflict began in February when Anthropic refused Pentagon Secretary Pete Hegseth's demand to remove restrictions on the use of Claude for fully autonomous lethal weapons and mass domestic surveillance of Americans.

The supply chain risk designation, formally made in March, cancelled Anthropic's military contracts and barred other Pentagon contractors from using its technology.

The designation against Anthropic marked a highly unusual application of the authority against a US company.

The company has since become a pariah at the White House, even as it plays a major role in the highly crucial AI sector and heads for a blockbuster IPO expected in weeks.

The White House has bristled at Anthropic CEO Dario Amodei's repeated warnings about the dangers of AI -- with US President Donald Trump calling them a hoax.

The appeals court decision created a potential legal conflict with a separate federal court decision in California that found last month that a broader ban imposed by the Trump administration against Anthropic was illegal.

The Pentagon decision upheld on Friday was based on public procurement regulations and now remains in effect.

"We respectfully disagree with the court's decision. Another federal court has already held the government's parallel designation unlawful. We remain confident in our position and are considering all options, including further review," an Anthropic spokesperson said in a statement to US media.

The military had been using Claude across a range of classified and sensitive systems. According to reports, that included during the January operation that captured and deposed Venezuelan leader Nicolas Maduro. (AFP)


Edited by Robert Kemp