Artificial intelligence lab Anthropic has no intention of easing its usage restrictions for military purposes, a person familiar with the matter said on Tuesday, adding talks continue after a meeting to discuss its future with the Pentagon.

The meeting between Anthropic CEO Dario Amodei and US Defense Secretary Pete Hegseth was scheduled to hash out a months-long dispute.

The AI startup has refused to remove safeguards that would prevent its technology from being used to target weapons autonomously and conduct US domestic surveillance.

Pentagon officials have argued that the government should only be required to comply with US law.

During the meeting, Hegseth delivered an ultimatum to Anthropic: get on board or the government would take drastic action, people familiar with the matter said.

The options included labelling Anthropic as a supply-chain risk or having the Pentagon invoke a law, the Defence Production Act, that would force Anthropic to change its rules, the people said.

The government gave Anthropic until Friday at 5pm to respond, according to a senior Pentagon official with knowledge of the matter.

The Pentagon did not immediately respond to a comment request. An Anthropic spokesperson said Tuesday’s meeting “continued good-faith conversations about our usage policy to ensure Anthropic can continue to support the government’s national security mission in line with what our models can reliably and responsibly do.”

The Pentagon has been negotiating AI contracts with multiple large language model, or LLM, providers, including Alphabet’s Google xAI and OpenAI, that are set to shape the future of military use of artificial intelligence for battlefield applications, spanning autonomous drone swarms, robots and cyber attacks.

Until recently, Anthropic was the only LLM provider on classified networks.

This week, the Pentagon announced it had reached an agreement with xAI to deploy it across classified networks.

Reuters has previously reported that it plans to move all AI companies to classified networks.

The Pentagon’s fight with Anthropic reached a fever pitch earlier this month when it grew concerned that the company had asked questions about how its AI products were used during the Venezuela military raid that captured President Nicolas Maduro.

During the meeting with Hegseth, Amodei said Anthropic did not raise concerns to Palantir or the Pentagon about whether the company’s AI products were used during the Venezuela raid, the source said.

Amodei also said the safeguards currently in place would not pose a problem to the Defence Department’s current operations.

Hegseth said the Pentagon would either invoke the Defence Production Act to compel Anthropic to comply with its demands or deem the company a supply chain risk, a determination typically imposed on companies from foreign adversaries.

This could upend Anthropic’s business with other companies that do business with the US government.

“This specific scenario is unprecedented and will almost certainly trigger a raft of downstream litigation if the Administration takes adverse action against Anthropic here,“ said Franklin Turner, a government contracts lawyer at McCarter & English.