Anthropic Faces Technical and Political Tests as Claude 3.7 Delay Precedes Government Clash

Anthropic signed a contract worth up to $200 million with the US Department of Defense in July 2025 to integrate Claude into military systems. The two sides later fell out over restrictions on the use of Claude for autonomous weapons and mass surveillance of Americans. The dispute raises questions about government procurement authority, corporate free-speech rights and the safety boundaries of military AI.

The Defense Department formally designated Anthropic a “supply chain risk” on March 5. On March 9, the company filed separate lawsuits in federal court in California and the US Court of Appeals in Washington, D.C. Judge Rita Lin suspended the designation and Claude ban on March 26. The D.C. court declined to stay the designation on April 8, and oral arguments concluded on May 19.

Anthropic’s Claude serves consumers, developers and the U.S. Department of Defense, making the platform’s reliability critical to enterprise workflows. The department signed an AI contract worth up to $200 million with Anthropic in July 2025, but the two sides have clashed over restrictions on mass domestic surveillance and fully autonomous weapons. The dispute has put the contract and Anthropic’s government business under pressure.

Claude suffered a global outage lasting more than four hours on March 2, 2026. Anthropic said its API remained operational and that the disruption was concentrated on Claude.ai and its login and logout pathways. Downdetector reports briefly approached 4,000 on March 25, while Opus 4.6 and Sonnet 4.6 experienced another brief disruption on March 27 before service was restored. Separately, U.S. President Donald Trump ordered most federal agencies to stop using Claude on February 27, while giving the Defense Department six months to phase it out.

Anthropic secured a US Defense Department AI contract worth up to $200 million in July 2025, but later fell out with the military after insisting that Claude must not be used for mass domestic surveillance or fully autonomous weapons. The Defense Department formally designated the company a supply-chain risk on March 5, 2026, restricting contractors from using its technology on defense contracts and extending the military procurement dispute to commercial customers.

At a court hearing on March 10, 2026, Anthropic said more than 100 corporate customers had raised concerns about the risks since the ban. One financial-services customer paused a $15 million transaction, while two other financial firms demanded the right to terminate at any time before proceeding with contracts worth a combined $80 million. Anthropic estimated that its 2026 revenue losses could reach hundreds of millions or even billions of dollars.

Anthropic has supported the U.S. military since June 2024 and secured a Pentagon contract worth up to $200 million in July 2025, with Claude also deployed on classified networks. At the heart of the dispute is the Pentagon’s demand that the model be available for all lawful uses. Anthropic insists that it must not be used for mass surveillance of Americans or fully autonomous weapons that can decide to fire without human involvement.

On February 24, 2026, Defense Secretary Pete Hegseth ordered CEO Dario Amodei to withdraw the restrictions by February 27 or face contract termination, designation as a supply-chain risk or the use of the Defense Production Act. The Pentagon formally notified Anthropic of the designation on March 4. Anthropic filed two lawsuits on March 9, saying several hundred million dollars in 2026 defense revenue was at risk and the broader impact could run into billions of dollars.

On July 14, 2025, the U.S. Department of Defense awarded Anthropic a contract worth up to $200 million to deploy Claude in classified national-security and military operations. The dispute is not over whether Anthropic should support national defense, but over the military’s demand that Claude be available for “all lawful uses.” Anthropic argues that existing laws may not keep pace with AI risks and insists on excluding domestic mass surveillance and fully autonomous weapons that operate without human involvement.

Defense Secretary Pete Hegseth issued an ultimatum on February 24, 2026, demanding that Anthropic remove the restrictions by 5:01 p.m. on February 27. After negotiations collapsed, the Pentagon formally designated Anthropic a supply-chain risk on March 5, putting the $200 million contract at risk of termination. Chief Executive Dario Amodei has reopened talks but maintains that Claude is not yet reliable enough for military defense, and is seeking explicit terms that preserve the company’s two red lines.