A federal judge dismissed weapons charges against a flamboyant gambling magnate-turned-politician on Tuesday, dealing a stinging setback to President Felipe Calderon's battle against organized crime and fueling claims that a pre-dawn military raid on the former mayor's compound was an attempt to damage his party ahead of Mexico's presidential elections.

But Jorge Hank Rhon did not go free as he left the federal prison. State officials immediately took him into custody and the former Tijuana mayor was being held without charges while investigators seek to collect evidence for a murder, said Heriberto Garcia, the Baja California state human rights ombudsman.

Dismissal of the federal charges followed 10 days of increasing questions about the raid in which he was captured. Hank Rhon's lawyers said raid was illegal because soldiers didn't have a search warrant. Supporters demonstrated in the streets for his freedom. Leaders of the Catholic Church joined calls for his speedy release.

"If they were going to make a political strike on this scale, why didn't they do it right?" said Jose Antonio Crespo, a political analyst at Mexico City's Center for Investigation and Economic Research. "They didn't lack evidence; they just needed to follow procedures and do things right."

Judge Blanca Evelia Parra Meza ruled there wasn't enough evidence to order Hank Rhon and eight others to stand trial on charges of possessing weapons restricted to military use, according to a statement from the court office. It did not elaborate on the reasons. The federal attorney general's office, which has insisted soldiers didn't need a search warrant, promised to appeal.

Hank Rhon was Tijuana's mayor from 2004 to 2007, when he staged a failed run for governor. He has long figured large on the national political scene, and not only because of the wealth amassed from his Caliente gambling empire.

His father was one of Mexico's best-known politicians, leader of faction in the Institutional Revolutionary Party that ruled Mexico from 1929 until 2000. National polls indicate that the man with the best chance to oust Calderon's National Action Party and recover the presidency in 2012 is Enrique Pena Nieto, who hails from that faction and has political ties to Hank Rhon.

The seeming collapse of the case echoed a 2008 strike against mayors from Calderon's home state of Michoacan, most of them from opposition parties, who were accused of protecting drug traffickers and were eventually released for lack of evidence.

David Shirk, director of the University of San Diego Trans-Border Institute, said it would be a "huge embarrassment" if Hank Rhon is cleared.

"It's not so much that they made a mistake. It's that they have not been able to convict a noticeable number of organized crime suspects," he said.

Plans for a victory celebration at Hank's Rhon's sprawling compound - which includes a casino, racetrack and private zoo - were put on hold after was shuttled from prison in the border city of Tecate to a Tijuana office of the state attorney general. Hundreds of supporters had waited outside the prison overnight.

Mexican law allows suspects to be held for up to 40 days without charges.

Garcia, the human rights ombudsman, said he didn't have details about the murder that led state authorities to detain Hank Rhon, but Baja California authorities have said two guns seized in the June 4 raid were linked to the Tijuana killings of a security guard in December 2009 and an alleged car thief in June 2010.

U.S. authorities have long suspected Hank Rhon of links to money laundering, but no accusations have been substantiated and he has strenuously denied ties to drug cartels. Controversy has dogged him since the 1988 murder of investigative journalist Hector Felix Miranda. Two of his bodyguards were convicted in the killing, but they denied the attack was linked to their boss, and no charges were filed against him.

Many Mexicans suspected that the army raid was at least partly aimed at muddying Pena Nieto's image.

Political commentator Salvador Garcia Soto wrote in Mexico City's El Universal newspaper Tuesday that the arrest reflects Calderon's tendency to portray Pena Nieto's party as part of Mexico's dirty past of one-party rule.

"They showed that they will use all the legal, judicial tools at their disposal," he wrote.

Institutional Revolutionary Party spokesman David Penchyna, a congressman, said the party was closely watching the case.

"It would be very bad for the democratic system if the judicial system were used for electoral purposes," he said.

Tijuana Archbishop Rafael Romo and several other senior Church leaders rallied to Hank's side.

"I have confidence in God that everything will be conducted in accordance with the law and you will soon be back with your family and us again," he wrote in a letter to Hank Rhon that was published Monday in Mexican newspapers.

Tens of thousands of supporters signed petitions in Tijuana to demand he cleared of wrongdoing. Virginia Mora, 66, met Hank Rhon in her hardscrabble neighborhood when he campaigned for mayor and stopped by for two servings of homemade soup. He paid her with a huge delivery of cement and other building materials.

"He likes to help people out, give gifts," said Mora, 66.

Bertha Guadalupe Diaz, a 66-year-old street vendor who regularly attends Hank's massive, free parties on Mother's Day and other holidays, recalled being summoned to City Hall when Hank Rhon learned she couldn't afford a hearing aid. He offered to pay the bill.

"Thanks to him, I hear," she said.