Several US states, led by California and New York, are preparing a lawsuit to block Paramount Skydance’s proposed $110 billion acquisition of Warner Bros, according to sources familiar with the matter.

The lawsuit is expected to be filed in the coming weeks and could mark one of the most significant state-led antitrust challenges in recent years. It was not immediately clear which other states would join the legal action.

California Attorney General Rob Bonta has been among the most vocal critics of the deal. On Thursday, Bonta criticised what he described as President Donald Trump’s “abdication” of federal antitrust agencies, arguing that states are increasingly being forced to take the lead on competition enforcement.

Bonta launched an investigation shortly after Paramount announced its plan to acquire Warner Bros, following a bidding contest that reportedly included streaming giant Netflix. A spokesperson for the California Attorney General’s office said on Friday that the investigation remains active but declined further comment.

Shares in Warner Bros. Discovery fell after Reuters first reported the planned lawsuit and were down 3.6% in afternoon trading. Shares of Paramount Global fell 6.7%.

While merger challenges do not always succeed, legal action can significantly delay transactions if courts issue orders preventing deals from closing while litigation continues.

Paramount has agreed to pay shareholders compensation beginning in October if the transaction remains incomplete. The company recently said those payments would amount to about $6.9 million per day.

A Paramount spokesperson defended the merger, saying the deal would strengthen competition in the entertainment industry.

“We will continue to fight against any attempt to derail ⁠a deal that plainly benefits consumers, creators, and the industry as a whole,” the spokesperson said.

The company has pledged to keep both studios operating and to produce at least 30 theatrical films annually after the merger is completed.

The proposed deal would combine two of Hollywood’s four major film studios and has drawn criticism from actors, writers and cinema operators concerned about job losses and reduced competition.

Cinema owners have argued that merging Warner Bros, known for franchises including Harry Potter and Superman, with Paramount Pictures would reduce the number of films available to theatres and limit consumer choice. (Arise News)