AI startup Anthropic has sued the Pentagon and federal agencies after being declared a supply chain risk, a designation typically reserved for Chinese and Russian vendors. The $380bn company filed in California federal court, calling the designation arbitrary and capricious and seeking to block the Trump administration from implementing it.

The dispute centers on Anthropic's refusal to sign an open-ended contract with the Department of Defense. CEO Dario Amodei insisted on two red lines: prohibiting use of its technology for lethal autonomous weapons and domestic mass surveillance. Defense officials demanded sweeping rights to deploy Anthropic's models without restrictions, leading to collapsed negotiations and the controversial designation.

The Pentagon's move forces companies to cut Anthropic from military supply chains, though the startup claims most customers will be unaffected. Three major partners—Amazon, Microsoft, and Google—said they'll retain ties outside defense work. The case highlights growing tensions between AI companies' ethical safeguards and government demands for unrestricted access to emerging technologies.