SAN FRANCISCO, California: A federal judge has blocked the Pentagon from blacklisting Anthropic, ruling in favor of the AI company in its dispute with the U.S. military over restrictions on using its Claude models.

U.S. District Judge Rita Lin found in a 59-page order on August 27 that the Pentagon's decision to designate Anthropic a national security supply-chain risk was "illegal and baseless."

"The empty invocation of national security is not a blank check to punish and retaliate against government critics," Lin wrote.

Anthropic sued in California federal court in March, alleging that Defense Secretary Pete Hegseth exceeded his authority in imposing the designation. The government can use the label for companies that expose military systems to possible infiltration or sabotage by adversaries.

The Pentagon's move blocked Anthropic from certain military contracts and followed the company's refusal to allow the military to use Claude AI models for U.S. surveillance or autonomous weapons.

Anthropic executives have said the designation could cost the company billions of dollars in lost business and reputational harm.

Anthropic welcomed the court's decision and said it remained "focused on working productively with the government to harness AI for our national security so all Americans benefit from this technology."

The Pentagon did not immediately respond to a request for comment.

Anthropic has argued that AI models are not reliable enough to be safely deployed in autonomous weapons and that it opposes domestic surveillance because it violates rights. The Pentagon has said private companies should not be able to constrain military action.

The designation marked the first time a U.S. company had been publicly declared a supply-chain risk under a government procurement law intended to protect military systems from foreign sabotage.

In its March 9 lawsuit, Anthropic alleged that the government retaliated against its views on AI safety, violating its First Amendment right to free speech. It also argued that it was denied an opportunity to challenge the designation, violating its Fifth Amendment right to due process.

The company said the Pentagon's decision was unlawful, unsupported by facts and inconsistent with the military's previous praise of Claude.

The Justice Department argued in a court filing that Anthropic's refusal to remove its restrictions could create uncertainty about how the Pentagon could use Claude and risk disabling military systems during operations.

The government said the designation resulted from Anthropic's refusal to accept contractual terms, not its views on AI safety.

Anthropic also has a separate lawsuit pending in Washington, D.C., challenging another Pentagon supply-chain risk designation that could exclude the company from civilian government contracts.