Anthropic is holding the line. At least for now.

The Pentagon approached Anthropic this week with a demand that it remove guardrails in its AI model Claude to prohibit mass domestic surveillance and fully automated weapons. But Anthropic is refusing to do that, according to a new statement from CEO Dario Amodei, who writes, “we cannot in good conscience accede to their request.”

There’s a lot of money on the line. And it’s anyone’s guess what happens next.

Earlier this week, Defense Secretary Pete Hegseth gave Anthropic a deadline of 5:01 p.m. ET on Friday to agree to the removal of all safeguards, threatening to boot Claude from U.S. military systems or designate the company as a “supply chain risk,” a label used for adversaries of the U.S. that’s never been applied to an American company before.

Hegseth, who refers to the Defense Department as the Department of War, has even threatened to invoke the Defense Production Act, which would theoretically allow the Pentagon to just demand Anthropic do whatever Hegseth wants.

Amodei pointed out Thursday in a letter posted online: “These latter two threats are inherently contradictory: one labels us a security risk; the other labels Claude as essential to national security.” Experts have called the contradictory messages from Hegseth “incoherent,” a label that might also apply to the Trump regime more broadly.

Anthropic, which has a $200 million contract with the Department of Defense, told CBS News that the Pentagon’s “best and final offer,” which was sent Wednesday, seemed to have loopholes that would allow the military to disregard the protections put in place.

“New language framed as compromise was paired with legalese that would allow those safeguards to be disregarded at will. Despite DOW’s recent public statements, these narrow safeguards have been the crux of our negotiations for months,” Anthropic reportedly said.

The new letter released by Anthropic on Thursday made sure to point out that the AI company works with the military and intelligence communities and that they “remain ready to continue our work to support the national security of the United States.” But asking to drop all safeguards is just a bridge too far.

“Anthropic understands that the Department of War, not private companies, makes military decisions. We have never raised objections to particular military operations nor attempted to limit use of our technology in an ad hoc manner,” the company wrote.

“However, in a narrow set of cases, we believe AI can undermine, rather than defend, democratic values. Some uses are also simply outside the bounds of what today’s technology can safely and reliably do.”

The company went on to list the two use cases where it believes safeguards are needed to protect American interests. In the section on mass domestic surveillance, Amodei put the word domestic in italics, as if to warn Americans more broadly about what’s happening right under our noses.

The letter notes that the government can purchase “detailed records of Americans’ movements, web browsing, and associations from public sources without obtaining a warrant,” something that obviously infringes on the rights of Americans. The Pentagon has suggested it doesn’t have a plan for mass surveillance of Americans, telling CNN the conflict with Anthropic has “nothing to do with mass surveillance and autonomous weapons being used.”

The second section of Amodei‘s letter, which covers autonomous weapons, acknowledges that AI-assisted weapons are already being used on battlefields today in places like Ukraine. But it warns, “frontier AI systems are simply not reliable enough to power fully autonomous weapons.” The letter goes on to say, “We have offered to work directly with the Department of War on R&D to improve the reliability of these systems, but they have not accepted this offer.”

Amodei met with Hegseth on Tuesday in a meeting that was described by CNN as “cordial,” but it will obviously be interesting to see where this goes.

Hegseth is not known as a particularly smart or level-headed guy, so it’s entirely possible that he tries to label Anthropic as both a national security threat and a part of America’s warfighting machine so vital that he’ll essentially draft the company to do what he wants. It sounds like we all get to find out by end of day Friday.