This tweet (from Under Secretary of State Jeremy Lewin) explains it:
https://x.com/UnderSecretaryF/status/2027594072811098230
https://xcancel.com/UnderSecretaryF/status/20275940728110982...
The OpenAI-DoW contract says "all lawful uses", and then reiterates the existing statutory limits on DoW operations. So it basically spells out in more detail what "all lawful uses" actually means under existing law. Of course, I expect it leaves interpreting that law up to the government, and Congress may change that law in the future.
Anthropic wanted to go beyond that. They wanted contractual limitations on those use cases that are stronger than the existing statutory limitations.
OpenAI has essentially agreed to a political fudge in which the Pentagon gets "all lawful uses" along with some ineffective language which sounds like what Anthropic wanted but is actually weaker. Anthropic wasn't willing to accept the fudge.