Anthropic, a prominent AI startup, is locked in a legal battle with the Pentagon, claiming the government’s “supply-chain risk” designation could cost the company billions. The dispute stems from Anthropic’s refusal to guarantee its AI won’t be used for mass surveillance or autonomous weapons.
On Tuesday, Anthropic urged US District Judge Rita F. Lin in San Francisco to quickly address its request to block the designation. This plea came just a day after the company sued the Defense Department.
Michael Mongan, Anthropic’s attorney, highlighted the immediate fallout. Over 100 enterprise customers have contacted the company, expressing doubts about continuing their partnerships.
Mongan cited specific financial setbacks: a financial services company halted a $50 million contract negotiation, a pharmaceutical company wants to shorten its contract by ten months, and a fintech company explicitly linked a $5 million reduction in its $10 million contract to Anthropic’s government issues.
Anthropic’s chief financial officer estimates potential revenue harm for 2026 could range from hundreds of millions to billions of dollars. This alarming projection convinced Judge Lin to move the hearing to March 24, instead of the original April 3 date.
Mongan also sought a promise from the government to avoid any retaliatory actions against Anthropic before the next hearing, like an executive order. However, James Harlow, a Justice Department lawyer, refused to offer any such commitments.
Anthropic wants the judge to lift the supply-chain risk designation and force US agencies to withdraw related directives. The company argues it’s being unfairly punished for disagreeing with the administration, setting a dangerous precedent for all federal contractors.
Last week, the Pentagon formally notified Anthropic of its decision. CEO Dario Amodei called the government’s actions “not legally sound” and stated the company had “no choice but to challenge it in court.”
