The mechanism that Washington is threatening to use is not some vague ban but a specific tool: placing Moonshot on the Entity List of the U.S. Department of Commerce — the same list that once cut off Huawei's access to American chips and components for years. Bessent stated directly on X that using open source code is not a license to steal American intellectual property, and large-scale industrial distillation will result in sanctions and Entity List designation if confirmed.
The specific accusation comes from Michael Kratsios, head of science and technology policy at the White House: he claims Moonshot built an entire internal system for large-scale distillation from American models while rotating multiple access methods to avoid detection. According to this accusation, Moonshot also accessed Nvidia's GB300 servers located in Thailand — Blackwell chips banned from sale to China. This is the crux of the entire story: the chip export ban does not prevent Chinese companies from renting hardware in third countries, and Kimi K3 — an open source model with 2.8 trillion parameters — emerged just days after Anthropic's Fable was made public.
Open-source code is not a license to steal intellectual property — but enforcement evidence is still lacking.
Winners and Losers
If the Entity List is actually applied, Moonshot will lose access to hardware, cloud computing services, and possibly American capital markets — a heavy blow for a company racing in technology. But the consequences do not fall on just one side: immediately after Kimi K3 launched, stock prices of American AI companies dropped because investors worried that a more open, cheaper model could undermine the commercial position of firms like Anthropic or OpenAI. In other words, the threat of sanctions is both a tool to protect intellectual property and a reaction to competitive pressure in the stock market.
Ironically, the policy of restricting American models due to security concerns is creating a reverse vulnerability. According to Fortune, when the Hugging Face platform was hit by an automated AI agent attack, they could not use the edge model from a leading American company to respond because that model's guardrails made it unable to distinguish between someone handling the incident and an attacker — forcing Hugging Face to turn to open source models from China to analyze the incident. This is a direct consequence of the Trump administration's use of export controls to block distribution of certain versions of Fable after discovering jailbreak vulnerabilities in the task network guardrail layer.
What to Watch
To date, both Moonshot and the U.S. Department of Treasury have not provided detailed responses to the accusations. Verifying distillation in practice is very difficult — some experts have expressed doubt that Kimi K3 was primarily created from Fable distillation as alleged. If Washington does not present specific technical evidence before taking action, this will be more of a political warning than an enforcement measure with foundation. What is worth watching is whether the Department of Commerce will formally add Moonshot to the Entity List, and whether the loophole of renting GB300 servers in third countries like Thailand will be tightened — because if not, every chip export ban will continue to be merely symbolic.