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The DC Circuit ruled 2-1 on Friday that the Defense Department had ample grounds to designate Anthropic a supply chain risk because the company encodes restrictions into Claude, including refusals on fully autonomous lethal weapons and mass surveillance of Americans, that could stop the model performing tasks the Pentagon deems necessary. The label keeps Claude out of Defense Department systems and contractor work; Anthropic says it has cost billions in lost business ahead of its IPO and is weighing further review. The dissent warns that any contractor can now be told to change its AI-use policy or be branded a national security threat.