A federal judge in San Francisco has temporarily blocked the Pentagon from enforcing its supply chain risk label against AI company Anthropic and from ordering federal agencies to stop using its chatbot, Claude. The preliminary injunction, issued on Thursday by Judge Rita Lin of the US District Court for the Northern District of California, gives Anthropic breathing room in its legal battle with the Trump administration.
Judge Lin wrote that the government's actions lacked legal basis at this stage, stating: “Nothing in the governing statute supports the Orwellian notion that an American company may be branded a potential adversary and saboteur of the US for expressing disagreement with the government.” She also described the measures as “arbitrary, capricious, [and] an abuse of discretion.”
Contract Talks Collapse Spark Lawsuit
The dispute emerged from failed negotiations between Anthropic and the Pentagon. In July 2025, the two sides had nearly reached a deal that would have made Claude the first frontier AI model approved for use on classified networks. However, the Pentagon later demanded that Anthropic permit military use of Claude “for all lawful purposes” without restrictions. Anthropic refused, specifically objecting to uses tied to lethal autonomous weapons and mass domestic surveillance.
After talks collapsed in February, Anthropic publicly criticized the Pentagon's position and subsequently faced retaliation. The company filed a lawsuit on March 9 in federal court in Washington, DC, arguing that Defense Secretary Pete Hegseth exceeded his authority by designating Anthropic a national security supply chain risk.
Judge: Punishing Public Criticism Is Unlawful Retaliation
During a March 24 hearing in San Francisco, Judge Lin pressed government lawyers on whether Anthropic was being penalized for bringing public scrutiny to the Pentagon's contracting stance. In the March 26 ruling, she said, “punishing Anthropic for bringing public scrutiny to the government’s contracting position is classic illegal First Amendment retaliation.” The order also pauses President Donald Trump's directive that told federal agencies to stop using Claude.
Anthropic said it was “grateful to the court for moving swiftly” and called the ruling a sign of likely success on the merits. The decision comes as Anthropic holds a strong position in enterprise AI. According to Menlo Ventures, the company captured 32% of that market in 2025, ahead of OpenAI at 25%. A government-wide ban could have weakened that standing, but for now the court order gives Anthropic time to defend its position while the broader case proceeds.