Why It Matters
A new Congressional Research Service report titled "Federal Government and Anthropic: Considerations for AI Innovation and Competition" examines the federal government's actions against Anthropic and what those actions mean for AI innovation, competition, and national security.
The Big Picture
The tension began months before the public actions. A dispute between the Department of Defense and Anthropic over certain uses of its AI technologies simmered through late 2025 and into early 2026, even as the Pentagon awarded Anthropic up to $200 million in a July 2025 contract alongside three other AI companies to accelerate military adoption of advanced capabilities.
On February 27, the administration moved decisively. President Trump directed all federal agencies to immediately cease using Anthropic's technology with a six-month phase-out period. The same day, Secretary of Defense Pete Hegseth announced he was directing the Department of Defense to designate Anthropic a "Supply-Chain Risk to National Security." Hegseth stated that effective immediately, no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic.
The designation triggered a cascade of consequences. By May 1, the Pentagon had agreed to use AI models from xAI, Google, and five other companies in classified systems, but Anthropic was excluded from that approved list.
The situation intensified in June. On June 1, Anthropic filed an S-1 with the SEC for a proposed IPO. Just days later, on June 9, Anthropic launched Mythos 5 for a small group of cyberdefenders and infrastructure providers via Project Glasswing in collaboration with the government, alongside Fable 5, a Mythos-class model designed for general use.
The Department of Commerce imposed export controls on both models on June 12, requiring Anthropic to restrict access to any foreign national, whether inside or outside the United States. In response, Anthropic disabled access to both Mythos 5 and Fable 5 for all customers. On June 30, the Department of Commerce lifted the export control restrictions, and Anthropic subsequently redeployed both models.
The administration issued Executive Order 14409 on June 2 which directed establishment of a voluntary framework for government-industry evaluation of frontier AI models. The order explicitly states it does not authorize a mandatory governmental licensing, preclearance, or permitting requirement for AI model development or distribution.
Political Stakes
Yet the legal foundation remains contested. Anthropic argues that 10 U.S.C. Section 3252 limits the supply chain risk designation only to DOD contracts, not to all commercial activity, a dispute that remains actively unresolved.
Anthropic has stated that USG actions are harming Anthropic irreparably. On February 12, Anthropic stated that its run-rate revenue had reached $14 billion, and on May 28, Anthropic announced that its run-rate revenue had surpassed $47 billion earlier in the month. The Department of State awarded Anthropic $18,960 in 2026, a pittance compared to DOD's earlier contract but a reminder of government reliance on the company's technology.
For Congress, the CRS report prepared by Laurie Harris and Clare Y. Cho and published on July 31 raises hard questions about the balance between innovation and security. The broader political context also matters.
A similar dynamic played out with OpenAI. The company's deal with the Pentagon triggered a massive wave of public backlash and user uninstallation of ChatGPT. Anthropic stated it does not believe today's frontier AI models are reliable enough to be used in fully autonomous weapons. The export controls on Mythos 5 and Fable 5 has renewed efforts in other countries to reduce reliance on American technology.
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