I suspect this will be reversed en banc.
Anthropic’s argument is really clear and easy to understand: we can’t simultaneously be a supply chain risk and also be a company the DoD demands we change our policies so they can use our models without restrictions.
The DoD could have used the same authority to seize the technology if it wanted to. Especially in a time of war. DoD has instead chosen to respect Antrhopic's boundaries and has simply barred anyone in the agency from buying a product that comes with strings attached.
This is 100% on Anthropic for product:market fit failure.
If I sell the DOD a service with contracted terms X/Y/Z, the DOD agrees, then later asks me to drop Z, and I refuse, how would that warrant the legal definition of a supply chain risk? How is the appropriate response for the DOD not to simply find another service provider?
The US has not declared war on Iran. No wartime legal mechanism is at play, and cannot be until Congress decides to declare war.
The DoW tried to change a contract they had signed. Anthropic refused. That doesn't make them a supply chain risk (the wording of which implies "likely to sabotage" the government).