Federal judge orders Pentagon to grant Alibaba reprieve from lobbying law

Alibaba just won a small but significant battle in what’s shaping up to be a major legal test of US national security law. A federal judge has ordered the Pentagon to give the Chinese tech giant a temporary reprieve from a provision that effectively forced lobbying firms to choose between representing Alibaba and doing business with the Department of Defense.

The law that started the fight

Section 851 of the fiscal year 2025 National Defense Authorization Act created a new restriction: Pentagon contractors can’t simultaneously represent companies that appear on the Section 1260H list, which identifies entities the Defense Department believes are linked to China’s military.

On June 8, the Pentagon added Alibaba to that list, alongside other major Chinese firms like Baidu and BYD. The list now includes 188 entities total.

The consequences were swift. Five major lobbying firms, including heavyweights Brownstein Hyatt Farber Schreck and Mercury Public Affairs, dropped their contracts with Alibaba in late June. The new restrictions started affecting contracts around June 30.

Alibaba’s constitutional argument

On June 23-24, Alibaba filed a lawsuit in federal court in San Jose against Defense Secretary Pete Hegseth, challenging both the Section 1260H designation and the lobbying restrictions.

Alibaba argues that Section 851 violates its First Amendment right to petition the government. When you make it functionally impossible for a company to hire lobbyists by threatening every potential lobbying firm’s Pentagon business, you’ve effectively silenced that company’s voice in Washington. Alibaba also argues that being placed on the list without adequate procedural protections, and then having that designation trigger cascading consequences for its ability to advocate before the government, violates due process principles.

The federal judge found enough merit in these arguments to issue a temporary order allowing Alibaba’s lobbyists to continue their work while the constitutional questions get sorted out. No final ruling has been made on the substance of the case.

Why crypto and tech investors should care

The Section 1260H list has become one of Washington’s primary tools for pressuring Chinese tech firms. The 188 entities currently on the list represent a significant slice of China’s technology ecosystem. If the court ultimately strikes down Section 851 or narrows its application, it could limit the government’s ability to use similar mechanisms against other companies. Conversely, if the law survives constitutional challenge, it establishes a template that could be expanded to other service providers beyond lobbying firms.

For Alibaba specifically, the temporary reprieve offers a narrow window to rebuild its lobbying presence. A favorable final ruling could stabilize the company’s relationship with US government agencies. An unfavorable ruling would confirm that the 1260H designation carries teeth far beyond symbolic blacklisting.

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