Anthropic said it would contest the decision, which outside experts said was 'likely illegal.' But the damage may already be done.

Anthropic has just hours to decide whether it will accede to the Defense Department's demands that it be able to use the company's AI models how it sees fit.

The Department of War has given Anthropic until 5 p.m. Friday to remove restrictions on how the military can use its AI, or face being labeled a national security threat.