A city panel in the U.S. capital voted on Wednesday to repeal a first-in-the-nation Internet gambling law for Washington, D.C., a spokeswoman said.

Support for online gambling had dried up as details surfaced about the roundabout way a contract was awarded to Greece's Intralot, the District of Columbia's lottery operator.

Stepping back from the online project, the city council's Finance Committee voted 3-2 to repeal a 2010 law that would have allowed it, said Denise Tolliver, chief of staff for Councilman Phil Mendelson, a sponsor of the bill.

The full 12-member council will hold the first of two votes on repeal on Tuesday, she said.

They may start over. I don't think they are that far yet, Tolliver said.

Internet gambling received a blow this week when Mayor Vincent Gray, who has generally supported the plan, backed repeal.

Resistance to the plan had grown as details surfaced about how the law came about. Internet gambling was added to the city's lottery contract months after the contract passed a 2009 council vote. It was legalized through a 2010 spending bill.

No date had been set for launch. Washington would have been the first U.S. jurisdiction to have its own site dedicated to games such as online poker and blackjack.

Gray and other supporters had argued that the District of Columbia needed millions of dollars in revenues from online gambling. But that argument was weakened with the city's announcement in December that revenue in the current fiscal year was expected to top forecasts by $42 million.

Byron Boothe, Intralot's vice president for government affairs, said Washington was really leading the (online gambling) charge and obviously they dropped the baton.

He said it would be difficult for the District of Columbia to revive the online gambling initiative since congressional sentiment has swung against state or local government oversight in favor of federal regulation.

A number of states are looking at Internet gambling, including Illinois, New York and Hawaii, he said. Nevada's Gaming Commission last year passed a framework to regulate online poker.

(Reporting By Ian Simpson; Editing by Cynthia Johnston)

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