A federal judge has determined the Trump administration failed to provide sufficient evidence to support labeling AI company Anthropic a supply-chain risk, a designation that would have blocked federal agencies from using its technology. The ruling came during a Thursday hearing in a case that highlights growing tensions between private AI developers and government clients over how military applications should be governed. Main Developments U.S. District Judge Rita Lin expressed skepticism about the government's justification for the ban, particularly its claim that Anthropic could disable or alter its AI models during military operations. She noted the Pentagon presented no proof the company could "flip some kind of kill switch" on delivered technology. Lin also criticized the government's argument that Anthropic's public criticism of the Department of Defense warranted the risk label. She called that reasoning "really troubling," warning it could set a dangerous precedent of retaliating against federal contractors who disagree with administration policy. Read also: CareCloud breach hits 345K patients with stolen SSNs, medical data Background The dispute originated from stalled contract negotiations between Anthropic and the Department of Defense. Anthropic refused to allow its AI to be used for mass surveillance of Americans or for targeting and lethal firing decisions, arguing the technology was not ready for such applications. The Pentagon countered that a private company should not dictate how the military uses technology, insisting it would use the tools in "lawful" ways. Anthropic filed two lawsuits against the DOD in March, one in California and another in Washington, challenging both the supply-chain risk designation and the resulting ban. Lin temporarily blocked the ban in March and is now considering whether to make that order permanent. Why It Matters The case tests whether the government can unilaterally label AI companies as security risks based on their policy disagreements. Experts say the Pentagon's claim that Anthropic could remotely control its models lacks evidence, but the administration's stance could chill private-sector cooperation with federal agencies. A permanent ruling against the ban would reinforce that contractors retain rights to express concerns about how their technology is deployed, especially in sensitive areas like lethal autonomous weapons. What's Next Lin is expected to issue a decision on whether to permanently block the ban. The parallel lawsuit in Washington continues, and the outcome could set a broader precedent for how federal agencies negotiate AI contracts with companies that impose ethical use restrictions. Anthropic has not indicated whether it would seek further legal remedies if the temporary order is not made permanent.