Anthropic's legal team alleges that the US government is actively pressuring commercial clients to abandon the AI startup and switch to rival providers. During a status conference on Tuesday, attorney Michael Mongan stated that the Department of Defense has effectively blacklisted the company from military work, causing immediate and irreparable harm. Mongan claimed that university systems and business-to-business partners have already begun expressing doubt and moving to competitors due to this pressure campaign. The dispute escalated after contract negotiations collapsed between Anthropic and the Department of Defense. Defense Secretary Pete Hegseth designated Anthropic a supply chain risk on February 27, issuing an order that prohibits any contractor or supplier doing business with the US military from engaging in commercial activities with the company. While the scope of this designation is contested, Microsoft has indicated that its legal team believes it can still utilize Anthropic's services for non-military purposes. The company subsequently filed an amicus brief urging a federal court to block the government's move. At the heart of the conflict is a fundamental disagreement over safety protocols. Anthropic CEO Dario Amodei stated the company could not comply with government demands for unrestricted use of its frontier model, Claude, particularly regarding autonomous weapons and mass surveillance of US citizens. The company maintained that private entities should be able to set boundaries on how their technology is deployed. Conversely, defense officials argued that a private corporation cannot dictate operational rules for the military. Following Amodei's refusal, Hegseth formally issued the risk designation. In response, Anthropic filed a lawsuit on Monday seeking a temporary restraining order to resume business with the government. The company argued that the Defense Department provided insufficient grounds to label it a national security risk. Furthermore, Anthropic contended that this designation has never before been applied to an American company and suggested the action was retaliatory, violating the firm's First Amendment rights to express views on AI safety. Financial and operational impacts have been swift. Krishna Rao, Anthropic's chief financial officer, testified in legal filings that the Department of Defense has contacted various portfolio companies to question their use of Claude. These clients have reportedly grown worried and uncertain about their ability to continue using the model, prompting a surge in switches to competing AI providers. The lawsuit seeks to halt these repercussions while the legal case proceeds.