Court says AI safety limits can count as a national-security supply-chain risk

A divided federal appeals court has upheld the Department of War’s exclusion of Anthropic from government procurement, turning a contract dispute into a major precedent about who controls an AI model’s boundaries. Anthropic restricted its systems from fully autonomous lethal operations and mass domestic surveillance. The department wanted access for all lawful purposes and invoked the federal supply-chain statute, 41 U.S.C. § 4713. In a 2-1 decision, the D.C. Circuit accepted the government’s view that a supplier’s ability and willingness to encode restrictions into future model versions can constitute a manipulation risk, even without malicious intent and even though Anthropic had no remote kill switch over models already deployed. The majority emphasized future updates, model opacity, and the possibility that a system might refuse a lawful mission at a critical moment. It rejected Anthropic’s due-process and retaliation claims and distinguished an August ruling from a California court applying a different statute. Judge Karen Henderson dissented, arguing that the law addresses hostile or subversive manipulation, not a vendor’s transparent enforcement of disclosed contract terms. The opinion reveals a genuine paradox. A constrained model may refuse an authorized operation; an unconstrained model may hallucinate a lethal target or enable surveillance that violates policy. Procurement law is now choosing which failure the state is more willing to own. The ruling does not decide that Anthropic’s limits were wise or that every model restriction is a supply-chain threat. It does show that safety policies can become disqualifying product features when the government believes mission authority must outrank a developer’s guardrails.