Chinese drone giant DJI has lost its lawsuit challenging a Pentagon decision to label it a “Chinese military company” in a ruling that raises new hurdles for its US business.

The US District Court for the District of Columbia upheld the Defense Department’s designation.

It found that DJI’s drones have “substantial theoretical and actual military application” and that state subsidies linked the company to China’s broader security apparatus.

Judge Paul Friedman said company policies barring military use were irrelevant given the dual-use nature of the technology, according to court documents and media reports.

Friedman dismissed parts of Washington’s case, however, rejecting claims that DJI was directly controlled by Chinese ministries or the Communist Party, and noting a past state equity stake did not amount to operational control.

The ruling does not amount to a consumer ban.

The American national security establishment wants to push DJI out of US airspace

DJI drones remain available for private sale in the US, but the designation restricts federal procurement and has dealt reputational harm.

Customs officials have also seized shipments under the Uyghur Forced Labor Prevention Act, while a mandatory review under the 2024 National Defense Authorization Act must be completed by December 2025.

That assessment could result in an outright import ban if DJI fails to prove its products pose no national security risk.

DJI, which analysts estimate controls more than half of the global consumer drone market, said it was disappointed by the decision and is weighing its legal options.

“This decision was based on a single rationale that applies to many companies that have never been listed,” a spokesperson said.

With the court’s ruling, DJI faces growing regulatory barriers in its largest overseas market, even as it remains the dominant player in civilian drones worldwide.