A judge said the Trump administration has not presented enough evidence “really justifying” its decision to ban the federal government from using artificial intelligence technology from Anthropic PBC by designating the company as a threat to the supply chain.

U.S. District Judge Rita F. Lin said on July 30 the argument that Anthropic’s public criticism of the Department of Defense justifies the ban is “really troubling” and risks setting a precedent for other federal contractors who might disagree with the government.

“Then the government can go ahead and retaliate against the contractor by labeling them as a subversive, by saying they’re an enemy of the state, taking away their contracts, threatening to take away contracts from anyone who might do business with them,” said the judge, who was appointed to the San Francisco court by former President Joe Biden.

Lin temporarily blocked enforcement of the ban in March and now is deciding whether to permanently overturn it. The judge said on July 30 that the evidence before her appears largely unchanged since March.

“If anything, it seems like the record, in some ways, has gotten worse for the government,” she said.

The Claude chatbot maker sued earlier this year, accusing the government of unlawfully retaliating against the company due to a disagreement over appropriate safeguards on AI technology used by the military. Lawyers for Anthropic have said that a ban would result in billions of dollars in lost revenue.

The high-stakes dispute arose from negotiations between Anthropic and the Pentagon. Anthropic wanted assurances that its AI technology would not be used for mass surveillance of Americans or autonomous weapons deployment, but the government argued that it could not accept any restrictions on its use due to national security concerns.

The California case is one of two legal challenges brought by Anthropic over being labeled as a threat. The company also sued in Washington, using a different legal argument. 

A three-judge panel of the federal appeals court in the District of Columbia has yet to issue a ruling, but expressed skepticism during a May hearing that Anthropic could legally second-guess the government’s assessment that it posed a risk to the supply chain.

The case is Anthropic v. US Department of War, 26-cv-01996, US District Court, Northern District of California (San Francisco).