A federal judge halted Paramount Skydance's $111 billion acquisition of Warner Bros. Discovery on July 20, 2026, granting a 14-day restraining order that a coalition of state attorneys general argue is necessary to assess US antitrust exposure to the deal.

The pause leaves Rocksteady, Avalanche Software, NetherRealm Studios, and TT Games in regulatory limbo just 48 hours before the deal was set to close on July 22. Judge Araceli Martinez-Olguin of the US District Court for the Northern District of California issued the order, which may extend up to 28 days.

What does the ruling change for the studios?

The merger itself remains approved by WBD stockholders, who on April 23, 2026 "overwhelmingly" backed the $111 billion all-cash transaction. The halt prevents the studios from formally transferring ownership until antitrust review concludes. Day-to-day operations continue under existing WBD management, with David Zaslav still in place as CEO, while the new parent waits to absorb the business.

California Attorney General Rob Bonta framed the lawsuit as a fight for market competition. "This is a critical first win in our case to ensure this megamerger never sees the light of day," Bonta said. "With our lawsuit, we're fighting for a free and fair market and a thriving film and television industry that serves creatives and audiences alike. We have a full tank of gas, the law on our side, and look forward to continuing to make our case."

Why did Netflix walk away?

Netflix withdrew its competing $82.7 billion bid on February 26, 2026, after PSKY raised its all-cash offer to $31 per share. Netflix co-CEOs Ted Sarandos and Greg Peters framed the exit as disciplined capital allocation: "This transaction was always a 'nice to have' at the right price, not a 'must have' at any price."

Peters had earlier signaled Netflix's indifference to WBD's game studios during a December 2025 investor call. "While they definitely have been doing some great work in the game space, we actually didn't attribute any value to that from the get-go because they're relatively minor compared to the grand scheme of things," he said. The streaming company committed roughly $20 billion to its own content slate while shelving the WBD games portfolio.

What's PSKY bringing to the table for games?

Paramount Skydance's in-house gaming arm, Skydance New Media under Amy Hennig, focuses on IP-driven AAA productions including Marvel 1943: Rise of Hydra and an untitled Star Wars title. Marvel 1943 has been delayed twice. That profile — narrative-driven licensed IP on premium platforms — overlaps more closely with WB Games' refocus toward Harry Potter, Game of Thrones, Mortal Kombat, and DC properties than Netflix's mobile- and cloud-led strategy.

How did the games division get here?

WBD's games arm spent the last 18 months contracting. The division reported "substantial underperformance" after Suicide Squad: Kill the Justice League failed commercially. Then-president David Haddad departed in January 2025, followed a month later by the closure of Monolith Productions, Player First Games, and Warner Bros. San Diego. The surviving studios reorganized around four IP franchises, with three internal promotions filling the vacated leadership slots.

Hogwarts Legacy remains the bright spot — the Avalanche-developed title moved more than 15 million units in its first three months.

What's the financial backdrop?

PSKY's financing drew scrutiny from the WBD board throughout the saga. As of January 7, 2026, WBD noted PSKY's $14 billion market capitalization required $94.65 billion in debt and equity financing — nearly seven times its total market value — and the company planned to take on more than $50 billion in incremental debt. Netflix, by contrast, carries a market capitalization of approximately $400 billion, an A/A3 credit rating, and estimated 2026 free cash flow of more than $12 billion.

PSKY's bid is backed by an $11.8 billion commitment from the Ellison family, three Gulf sovereign wealth funds contributing $24 billion combined, and undisclosed commitments from RedBird Capital Partners and Jared Kushner's Affinity Partners. Tencent initially committed $1 billion but pulled out on December 4, 2025.

What happens next?

The restraining order's 14-day window runs through early August 2026, with the option to extend to 28 days. WBD and PSKY must then clear reviews from the US Department of Justice and the European Commission before closing. The studios' fate — particularly under a PSKY ownership that already operates a competing AAA narrative-games shop — will hinge on whether integration plans emerge before the next court hearing and whether the state coalition's antitrust case gains traction.