A federal judge in California has ruled that Defense Secretary Pete Hegseth acted unlawfully when he designated artificial intelligence company Anthropic a national security supply-chain risk, delivering a major legal victory to the maker of Claude. U.S. District Judge Rita F. Lin ruled Thursday, Aug. 27, 2026, that the government’s actions against Anthropic amounted to unlawful retaliation in violation of the First Amendment. The company did not receive the process required by the Fifth Amendment, Lin also ruled.
Lin also concluded that Hegseth’s decision violated the governing statute and was “arbitrary and capricious.” The 59-page ruling came in Anthropic’s lawsuit against the Trump administration and the Department of Defense, which the administration now calls the Department of War.
Lin’s decision blocks the government’s supply-chain designation. It represents the latest development in a dispute over how the U.S. military can use AI.
Anthropic pushed back on Claude’s use in domestic surveillance, autonomous weapons.
The dispute began in February, when Anthropic and the Defense Department reached an impasse over contractual restrictions on the military use of Claude, according to Anthropic’s statements and court records. Anthropic had sought two restrictions: It did not want Claude used for mass domestic surveillance of Americans or for fully autonomous weapons.
Anthropic CEO Dario Amodei said the company supported lawful national security applications but argued that current AI systems lacked the reliability needed for fully autonomous weapons and that mass domestic surveillance raised fundamental rights concerns. On Feb. 27, Hegseth announced that the department would designate Anthropic a supply-chain risk.
Anthropic subsequently received formal notice of the designation and challenged the government’s action in court. The designation affected Anthropic’s ability to work on Department of War contracts, leading to a broader dispute over whether companies doing business with the military could continue commercial relationships with Anthropic. Lin previously found that the government’s actions likely violated Anthropic’s constitutional rights and issued a preliminary injunction in March.
Lin’s new ruling takes things further
Lin’s latest ruling went further than her March preliminary finding. In addition to concluding the government’s challenged actions constituted unlawful First Amendment retaliation and that Anthropic was denied the pre-deprivation process required under the Fifth Amendment, she found that Hegseth’s supply-chain designation violated the governing statutory framework. Reuters reported that Lin’s ruling found no material dispute over those conclusions.
Lin also rejected the government’s reliance on national security as sufficient justification for the actions. In her ruling, she wrote that the “empty invocation of national security is not a blank check to punish and retaliate against government critics.”
The judge pointed to what she described as inconsistencies in the government’s treatment of Anthropic. Among them, the government had considered using the Defense Production Act with the company while simultaneously labeling it a national security supply-chain risk.
The California ruling is not the only legal battle over Anthropic’s designation. In April, the U.S. Court of Appeals for the D.C. Circuit denied Anthropic’s request to pause Hegseth’s supply-chain designation while the case proceeds, but granted expedited review. The court described the case as raising “novel and difficult questions” without deciding the merits, according to the D.C. Circuit Court order.
Meanwhile, the government appealed Lin’s March injunction, which blocked enforcement of Hegseth’s directive and the supply-chain designation. The broader legal dispute remains unresolved as the appeals continue.
News of Judge Lin’s ruling came as reports say the U.S. Navy under Hegseth is under financial strain. A Navy spokesperson pushed back on those claims.
Published: Aug 29, 2026 06:45 am