A San Francisco federal judge on Thursday ruled that the Pentagon's blacklisting of artificial intelligence giant Anthropic earlier this year was illegal.
U.S. District Judge Rita Lin found that the Department of Defense violated the First Amendment by designating Anthropic a supply chain risk "based on a desire to make a public example" out of the company. Lin wrote that while the government is owed deference on matters of national security, its actions were not founded on any "articulable basis."
"Defendants claim that because of Anthropic's 'increasingly hostile manner through the press' and its criticism of the Department of War's views on AI use, Defendants 'cannot trust Anthropic to ensure the integrity of its models,' " Lin wrote in her order. "Neither the Constitution nor the federal statute invoked by Defendants allows them to impose sweeping penalties based principally on Anthropic's critique of the Administration's views."
In March, the DOD designated Anthropic a supply chain risk, meaning the company purportedly threatened U.S. national security, after negotiations about how the military could use its Claude AI models spiraled out of control.
Anthropic wanted assurance that its technology would not be used for fully autonomous weapons or domestic mass surveillance, and the DOD wanted Anthropic to grant the agency unfettered access to Claude across all lawful purposes.
Talks escalated and then collapsed, and Anthropic became the first American company to publicly be named a supply chain risk. The designation barred defense contractors from using Anthropic's technology in their work with the agency.
Anthropic sued the Trump administration in San Francisco and Washington, D.C., an effort to reverse its blacklisting. The DOD relied on two distinct designations to justify its supply chain risk action, which meant they had to be litigated in two separate courts.
Lin's ruling on Thursday handed Anthropic a major victory, but the company's litigation in D.C. is still ongoing. Until that case is resolved, Anthropic still technically remains a supply chain risk.
In a statement, Anthropic praised Lin's decision.
"We welcome the court's ruling that this supply chain risk designation was unlawful," a spokesperson told CNBC. "We remain focused on working productively with the government to harness AI for our national security so all Americans benefit from this technology."
The ruling clears a significant hurdle for Anthropic as it marches toward what's expected to be a near-record IPO. While the company has shown no signs of a slowdown since the blacklisting, if it's able to reestablish ties with the Pentagon, it could open additional business opportunities that had been cut off.
Anthropic has said it brought the lawsuits an effort to return its business to the status quo before it was designated a supply chain risk. The suits would not require the Pentagon to restart its work with the company.
WATCH: Department of Defense Under Secretary: Evident by Anthropic’s actions it was a ‘supply chain risk’