Gotrade News - Anthropic asked the D.C. Circuit appeals court on October 13 to rehear its challenge to the Pentagon's supply-chain risk label, according to Unite.AI. A 2-1 panel upheld the label on September 25, which lets the Defense Department keep Claude out of military work.
The filing is a petition for panel rehearing or rehearing en banc, meaning a review by the full court, and its outcome matters for the cloud and AI companies tied to Anthropic and for rivals competing for defense AI work, as The Tech Buzz reported.
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What Anthropic's Rehearing Petition Argues
According to Unite.AI, Anthropic filed the petition under Federal Rule of Appellate Procedure 40 in the consolidated case Anthropic PBC v. U.S. Department of War, challenging the September 25 judgment that denied its petitions for review.
The company is represented by WilmerHale, and fifteen amicus briefs were filed in the case, including one from 149 former judges.
The petition argues that the majority read the statute's "otherwise manipulate" language too broadly, that the Defense Secretary skipped required notice before the designation, and that the panel's First Amendment finding cannot be reconciled with a separate California ruling, per Unite.AI.
Why the Pentagon Labeled Anthropic a Supply-Chain Risk
The designation was made under the Federal Acquisition Supply Chain Security Act of 2018 after Anthropic refused to drop contract limits on using Claude for lethal autonomous warfare and mass surveillance of Americans, according to Unite.AI.
The formal determination was issued on March 3, 2026, following a February standoff between CEO Dario Amodei and Defense Secretary Pete Hegseth.
As reported by the Associated Press, the September ruling allows the Pentagon to remove Claude from its systems, bar Anthropic products from Defense Department work and prohibit contractors from using them in that work, though the products are not barred from the federal government as a whole.
Judge Gregory Katsas wrote that the definition turns "on what Anthropic does, not why Anthropic does it," while Judge Karen LeCraft Henderson dissented.
"Another federal court has already held the government's parallel designation unlawful." Anthropic statement, September 25, 2026, via the Associated Press
Pentagon chief spokesman Sean Parnell said the ruling "completely validates the Department's position," per the AP. In a separate case, a federal judge in California found this summer that the Pentagon acted illegally by punishing Anthropic for criticizing its views on AI use.
Amazon (AMZN): Investor and Cloud Partner in the Dispute
Amazon (AMZN) is an Anthropic investor, and Anthropic first worked with classified information through a supply deal via Amazon's cloud, according to Reuters. Reuters reported in March that Amazon CEO Andy Jassy had discussed the Pentagon dispute with Amodei, and that investors were focused on avoiding the designation because it could seriously hurt Anthropic's sales to business customers.
Alphabet (GOOGL): Pentagon Contracts as Anthropic Sits Out
Google, owned by Alphabet (GOOGL), and OpenAI have won Pentagon contracts through streamlined procurement while Anthropic is excluded from those opportunities, according to The Tech Buzz. The outlet cited projections that defense AI spending will reach $15 billion a year by 2027.
The Tech Buzz also reported that Anthropic is courting investors ahead of a potential IPO, and that Pentagon revenue could affect its valuation.
Legal observers quoted in that report expect the case to test whether the Pentagon followed proper procedures and whether its security justifications hold up.
This article is for education and information only and is not investment advice. Investment decisions are yours to make after your own research.
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