> but it's not free to then claim the company that offered those terms is a security risk

Yes they are free to do that. You have to blame Congress for giving them that authority under the Federal Acquisition Supply Chain Security Act and specifically 41 U.S.C. § 4713.

But Claude’s ToS didn’t prohibit use of Claude for sensitive military operation but it was coded to do so. It was part of the government’s evidence

No, they can only do that if a company is a true supply chain risk. Not everyone some idiot in the government doesn't like is a such a huge risk to the country that they can be banned from doing business with anyone doing business with the DoD.

Ultimately this is for the courts to decide, and the current decision is not final. And while the two Trump-nominated judges agreed with you, the other judge agrees with me - so at least we can say that neither my nor your position is legally absurd.