On February 27, 2026, President Trump directed federal agencies to stop using technology from U.S. artificial intelligence (AI) company Anthropic, and Secretary of Defense Hegseth announced that he was directing the Department of Defense (DOD) to designate Anthropic a “Supply-Chain Risk to National Security.” (DOD and the Secretary are now using “Department of War” and “Secretary of War” as “secondary” designations per Executive Order 14347.) These actions followed a reported months-long dispute between DOD and Anthropic regarding certain uses of its AI technologies. On June 12, 2026, the Department of Commerce (DOC) reportedly imposed export controls on certain AI models—Mythos 5 and Fable 5—from Anthropic’s Claude family of models. The export controls were lifted on June 30, 2026. The risk designation, use prohibitions, and export control restrictions may have implications for AI innovation and competition, including at Anthropic and other domestic AI companies. This In Focus provides information on the AI models under debate, U.S. government (USG) actions and their potential implications, and considerations for Congress. Frontier AI: Capabilities and Limitations Frontier AI models are the most advanced foundation models—general-purpose AI models pretrained on large datasets that can be used for many applications. Anthropic’s Claude models, including several frontier models, have reportedly been deployed across DOD and national security agencies for such applications as intelligence analysis, operational planning, and cyber operations. In June 2024, Anthropic stated that it was the first AI company to deploy frontier models in classified USG networks. In July 2025, four U.S. AI companies, including Anthropic, entered into contracts of up to $200 million each with DOD to “accelerate [DOD] adoption of advanced AI capabilities to address critical national security challenges.” In classified DOD systems, the Pentagon agreed to the use of AI models and services from xAI, Google, and six other tech companies as of May 1, 2026. Anthropic was not included. In February 2026, Anthropic claimed that it requested two use exceptions for its Claude models during contract negotiations with DOD. First, Anthropic stated that it “do[es] not believe that today’s frontier AI models are reliable enough to be used in fully autonomous weapons. Allowing current models to be used in this way would endanger America’s warfighters and civilians.” Second, Anthropic asserted that “mass domestic surveillance of Americans constitutes a violation of fundamental rights.” Anthropic’s requested use exceptions highlight a broader debate over frontier AI model capabilities and limitations. Though frontier AI models demonstrate powerful capabilities, as measured by publicly available benchmarks and assessments, some studies have described their potential limitations, particularly regarding safety risks. A December 2025 Frontier AI Trends Report by the UK’s AI Security Institute reported that, in its evaluations of frontier AI systems across domains critical to national security and public safety, model safeguards are improving, but the institute found “vulnerabilities in every system [it] tested.” Anthropic released Mythos Preview to about 50 partners in April 2026 through a collaborative called Project Glasswing. Per Anthropic, the company limited availability because of the model’s advanced capability to find and exploit software vulnerabilities. On June 9, 2026, Anthropic released Mythos 5 for “a small group of cyberdefenders and infrastructure providers” via Project Glasswing, “in collaboration with the [USG],” and Fable 5, a “Mythos-class model ... made safe for general use,” to the public. As mentioned, DOC subsequently imposed and lifted export control restrictions on these products in June 2026. Recent Federal Actions On February 27, 2026, President Trump directed federal agencies to “IMMEDIATELY CEASE all use of Anthropic’s technology” and outlined a six-month “phase out period for Agencies like [DOD] who are using Anthropic’s products, at various levels.” That same day, Secretary Hegseth announced the designation of Anthropic as a supply chain risk to national security, stating, “no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic.” DOD made designations under two distinct statutes: 10 U.S.C. §3252 and 41 U.S.C. §4713. Federal agencies took actions to stop using Anthropic’s models. For example, the General Services Administration (GSA) announced that it was removing Anthropic from USAi.gov and its multiple award schedule (i.e., long-term government-wide contracts with commercial firms). On June 12, 2026, DOC required Anthropic to restrict Mythos 5 and Fable 5 access to “any foreign national, whether inside or outside the United States.” In response, Anthropic disabled access to both models for all customers. This followed Executive Order 14409 of June 2, 2026, which directed the establishment of a voluntary framework to facilitate USG-industry evaluation of frontier AI models. On June 30, 2026, DOC lifted export control restrictions, and Anthropic then redeployed Mythos 5 and Fable 5. Potential Effect on Anthropic Some information suggests that USG actions might not have a significant financial effect on Anthropic. The $200 million awarded by DOD and an $18,960 award from the Department of State in 2026 (the only government contract with Anthropic on USAspending.gov) are relatively small compared to the company’s run-rate revenue (i.e., annual revenue estimate based on its current financial performance). On February 12, 2026, Anthropic stated that its run-rate revenue had reached $14 billion, and on May 28, 2026, Anthropic announced that its run-rate revenue had surpassed $47 billion earlier in the month. On June 1, 2026, Anthropic filed documents for a proposed initial public offering. Anthropic has stated that USG actions are “harming Anthropic irreparably.” If Anthropic were to lose a significant share of its revenue or funding from investors, it might have difficulty continuing to develop its AI models, potentially affecting its ability to compete and innovate. The effect of USG actions on Anthropic may partially depend on the response of its clients. For example, after Secretary Hegseth’s February 27, 2026, actions, some initial reporting indicated that a subset of defense contractors stopped using Anthropic’s AI models, while others were waiting to see how the conflict resolved. Anthropic has argued that DOD’s designation of it as a supply chain risk is illegal and that DOD should not prohibit contractor use of Claude outside of DOD contracts. Anthropic Lawsuits On March 9, 2026, Anthropic filed two federal lawsuits against the USG. In one, filed in a federal district court in California, Anthropic argues that the government’s actions, including DOD’s supply chain risk designation under 10 U.S.C. §3252, violated the Administrative Procedure Act (APA) and the First and Fifth Amendments. The second lawsuit, filed with the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit), challenges the legality of DOD’s designation of Anthropic as a supply chain risk under 41 U.S.C. §4713 and order to remove all Anthropic products from DOD’s systems. On March 26, 2026, a federal judge in the first suit granted Anthropic’s motion for a preliminary injunction and temporarily blocked the implementation of this designation and the President’s directive ordering federal agencies to stop using Claude. In response, GSA restored Anthropic on USAi.gov and its multiple award schedule. On August 27, 2026, the same judge vacated and permanently enjoined enforcement of the Section 3252 designation and Secretary Hegseth’s directive that other defense contractors stop doing business with Anthropic on the grounds that DOD violated Anthropic’s First and Fifth Amendment rights and the APA. In the second suit, on September 25, 2026, the D.C. Circuit denied Anthropic’s challenge, upholding DOD’s supply chain risk designation under Section 4713. As a result, DOD may continue to enforce its directive to remove all Anthropic products from DOD systems, barring additional court action. Potential Implications for Innovation and Competition USG actions against Anthropic might have broader effects on AI markets and competition. For example, if USG actions negatively impact Anthropic’s revenues and thereby its ability to develop frontier models, that would reduce the number of innovative AI models that other companies could use to create AI products. However, USG actions also appear to have contributed to a boost in public adoption of Claude, which became the most popular app on Apple’s top free apps in the United States on February 28, 2026. Separately, OpenAI’s decision to strike a deal with the Pentagon reportedly resulted in public backlash as users uninstalled ChatGPT. USG actions against Anthropic have also raised concerns about potential effects on innovation and U.S. competitiveness. Some trade groups reportedly raised concerns that designating an American technology company as a national security risk would “have a chilling effect on U.S. innovation.” A letter reportedly sent by former defense officials, academics, and tech policy leaders to congressional committees asserted that “blacklisting an American company weakens U.S. competitiveness” and warned that “this is not a marketplace any serious entrepreneur or investor can build around.’” The sudden inability to use Mythos 5 and Fable 5 reportedly renewed efforts in other countries to lessen their reliance on American technology. Further, while some analysts have noted that the DOC export controls were aimed at preventing national security risks from possible access to Mythos by the Chinese government, others have voiced concern that the process leading to DOC’s reversal of the restrictions was opaque and “will not lend itself well to a stable, investable, trustworthy industry over time.” Considerations for Congress Federal policies and actions may influence competition among AI companies and potentially encourage or stifle innovation. Congress may conduct oversight on the extent of DOD’s authority to declare Anthropic a supply chain risk to national security and how such actions may affect private sector innovation. Congress may also consider legislation to clarify safety and security considerations around the use of AI technologies for sensitive applications, such as public surveillance, and to establish an AI regulatory approach that balances safety, national security, and innovation. Alternatively, Congress may wait to see if the USG and Anthropic reach an agreement or if there is additional legal action. In weighing these options, among others, Congress might consider a range of questions, including these: How do certain types of government actions, such as restricting access to specific models, affect revenue reliability for AI businesses? How might disputes between Anthropic and the federal government influence future agreements between private companies and the federal government? How difficult and costly is it for government agencies to switch from one AI foundation model to another? How might USG actions in response to a company’s efforts to maintain safety measures affect industry efforts to innovate in AI safety and security? In light of international competition to lead in AI development, what might be the effects of USG actions against one AI company on the ability of (or incentives for) other U.S. AI companies to innovate and invest in building AI models?
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