The lawsuit from Arizona, Texas, Oklahoma and Nevada seeks a temporary restraining order that would prevent the IANA contract from expiring on September 30. (If or when it expires, IANA, which oversees the world's DNS and IP address allocations, will be completely under ICANN control.)
This legal challenge comes the day after an effort to get Congress to block the transition failed.
The lawsuit [PDF] has been filed in Texas and a judge is expected to rule on whether to put a hold on the transition later today. The US Department of Commerce's National Telecommunications and Information Administration (NTIA) has said it will not comment on the matter.
The attorneys general make five main claims:
The contract is US government property and requires explicit Congressional approval before it can be handed over.
The transition would violate the First Amendment.
The NTIA did not follow the correct public comment procedures.
The NTIA does not have the authority to hand over the contract.
The transition does not properly protect the .gov and .mil top-level domains.
As you would expect from a lawsuit lodged by states' top lawyers, the content and explanations within the lawsuit over how the internet works and the role of the NTIA and ICANN is largely accurate – a rarity in this area.
There are significant flaws in the arguments put forward, however.
The critical issue is likely to be what is allowed to happen to the .gov and .mil top-level domains, since this is the issue on which the attorneys general have hitched their right to sue.
The states rely heavily on the use of .gov domain names and argue that following the transition, "the States have no assurance that ICANN will not delete the .gov top-level domain name or otherwise increase costs for the States."