A federal judge in San Francisco has issued a preliminary injunction against the Pentagon, temporarily blocking its designation of Anthropic as a supply chain risk. Judge Rita Lin of the District Court for the Northern District of California also halted a directive from President Donald Trump ordering all federal agencies to stop using Anthropic’s AI chatbot, Claude. The ruling, issued on March 26, marks a significant legal setback for the Trump administration’s actions against the AI company.
In her order, Judge Lin stated that nothing in the governing statute supports the idea that an American company can be labeled a potential adversary simply for expressing disagreement with the government. She described the measures taken by the Trump administration and Defense Secretary Pete Hegseth as appearing arbitrary, capricious, and an abuse of discretion. The judge also characterized the punishment as a violation of First Amendment protections, calling it classic illegal retaliation for public criticism of the government’s contracting position.
The legal dispute traces back to a contract signed in July 2025 between Anthropic and the Pentagon, which would have made Claude the first frontier AI model approved for use on classified networks. Negotiations broke down in February when the Pentagon sought to renegotiate the terms, demanding that Anthropic permit military use of Claude for all lawful purposes and without restrictions. Anthropic refused, maintaining that its technology should not be deployed for lethal autonomous weapons or mass domestic surveillance of Americans.
Following the collapse of negotiations, Trump posted on Truth Social on February 27, ordering all federal agencies to cease using Anthropic products and accusing the company of making a disastrous mistake by attempting to strong-arm the Department of War. Anthropic responded by filing a lawsuit on March 9 in a Columbia federal court, alleging that Hegseth had overstepped his authority in designating the company a national security supply-chain risk. A 90-minute hearing was held in San Francisco on March 24, during which Judge Lin questioned government lawyers about whether Anthropic was being penalized for publicly criticizing the Pentagon.
The stakes of the dispute are considerable given Anthropic’s standing in the enterprise AI market. According to Menlo Ventures, Anthropic held a 32% share of the enterprise AI market as of 2025, placing it ahead of OpenAI, which held 25%. A government-wide ban on Anthropic’s products would have posed a serious threat to that market position.
Anthropic responded to the ruling with a statement saying it was grateful to the court for acting swiftly and expressed confidence that it is likely to succeed on the merits of the case. The injunction provides the company with temporary relief while the broader legal proceedings continue. The outcome of the case could have wider implications for how the government engages with AI firms and the limits of executive authority over federal contracting decisions.
Originally reported by CoinTelegraph.
