The Trump administration defended its designation of Anthropic as a supply chain risk in oral arguments in federal court Tuesday, even as it actively tries to figure out how it can adopt its most powerful model yet, Mythos, to combat cyber threats.Why it matters: Treating a U.S. company as a national security threat while looking to use its technology to combat foreign adversaries is an awkward needle to thread. Catch up quick: The Pentagon claims it's unworkable for the military or its vendors to rely on Anthropic because the company might pull the plug at any time due to its "ideological" views around AI safety.Unlike other model-makers, Anthropic refused to agree to the Pentagon's "all lawful use" standard for AI deployment.Anthropic argues it has no way to control its AI models once they're deployed in classified settings, and has stuck to its red lines around the use of its tools for mass domestic surveillance or the development of weapons that fire without human involvement.What they're saying: The Pentagon faced skepticism from the D.C. Circuit Court of Appeals in Tuesday's arguments."For the life of me, I do not see any evidence of maliciousness despite the best efforts of [Pentagon Under Secretary Emil Michael], who in his memo refers to you as having mal-intent, a bad motive, cannot be trusted," DC federal appeals court Judge Karen Henderson said."To me this is just a spectacular overreach by the department."But Anthropic found itself on the defensive, too. In an exchange with Anthropic's lawyer, Judge Gregory Katsas pinpointed the difficulty of the company's usage policies for evolving AI models."It doesn't really matter whether we focus on what might happen with the one they're currently using or what might happen with the one that everyone knows they will need three months from now, because AI three months from now will be totally different from the AI of today."Katsas and Judge Neomi Rao raised the Pentagon's concern that Claude is opaque (a feature of AI models that is not unique to Anthropic). "Forget about all the crazy rhetoric about... 'crazy company' ... and forget about the concern about the kill switch in real time. They still have this concern, right? The model is unpredictable," Katsas said. The other side: The government's lawyer, Sharon Swingle, suggested the main issue is trust. Swingle said there's a "very real prospect of new red lines" and an "increasingly hostile posture" in negotiations.Swingle said the Pentagon decided to use the supply chain risk designation instead of a less intrusive measure because it had to act quickly.Anthropic's lawyer Kelly Dunbar, said if the government doesn't trust its model, it could simply decide not to do business with the company — a less intrusive measure that Congress requires agencies to consider first. The blacklisting is a permanent legal disbarment that risks broader government-wide, commercial exclusions — and damages its reputation by applying the national security threat label, Dunbar argued.What's next: A split decision between the federal appeals court in DC and a San Francisco court means Anthropic can't enter into new defense contracts, but can continue its contracts with non-Pentagon agencies while litigation plays out. The D.C. circuit — in an acknowledgement that the company can suffer irreparable harm — agreed to expedite the case and could rule within a few weeks, though it sometimes takes several months in complex matters.President Trump gave the Pentagon six months — until August — to rip out Anthropic.