By Tom Kenworthy
Washington Post Staff Writer
Tuesday, February 10, 1998; Page A05

WORLEY, Idaho—This speck of a town hardly seems the place for the next quantum leap in gambling. But it is here, say members of the tiny Coeur d'Alene Indian tribe, that America's love for the lottery and infatuation with the Internet will intersect in a rich explosion of high-tech gaming.

With the same bravado they brandished last year in a federal suit claiming ownership of the northern Idaho tourist mecca of Lake Coeur d'Alene, the 1,400 members of the Coeur d'Alene tribe have launched U.S. Lottery. Headquartered at their 5-year-old bingo hall and casino here on a two-lane country road 25 miles southeast of Spokane, Wash., U.S. Lottery bills itself as "the first ever parimutuel lottery to be accessible both by telephone and Internet."

Available to residents of the District of Columbia and the 33 states that have state-run lotteries, U.S. Lottery since last spring has run several instant-win bingo and scratch lottery games on its Internet site, www.uslottery.com. Then late last month, the tribe and its corporate partner, UniStar Entertainment Inc., began offering the big one: a weekly six-number draw lottery, with a guaranteed weekly prize of at least $1 million.

Tribal officials predict that the game, which is like many state Lotto games, will be huge. "This is new territory so it's hard to project," said Laura Stensgar, marketing director for the tribe's gaming operations. "But it's so accessible, by phone and Internet, we expect jackpots up to $100 million."

That assumes the public will come knocking on the Coeur d'Alenes' electronic door, that the tribe clears legislative and legal hurdles being erected in its path and that the lottery does not get lost in the clutter of gambling sites beginning to crowd the Internet from offshore locations.

None of those assumptions is a sure bet.

In the early stages, public response to the weekly draw lottery has been less than overwhelming. Last Tuesday, when Stensgar stepped up on a raised platform to activate the blower that randomly selects six Ping-Pong-like balls with numbers on them, only 3,110 tickets had been sold for the third weekly drawing.

But Dave Matheson, chief executive officer of the tribal gaming operations and a senior official in the Department of the Interior during the Bush administration, said the intent is to start slow, with major marketing efforts not even scheduled to begin until the spring. "We want to make sure we can handle the volume," said Matheson, predicting that if the game is allowed to operate free of legal interference "it should be the biggest lottery game in the history of the country."

Opposition from state governments that run their own lotteries is another obstacle, as is legislation pending in Congress. The attorneys general of Missouri and Wisconsin have sued to block U.S. Lottery, claiming it violates their state laws and fails to meet a central requirement under Indian gaming laws, which is that the games be located on reservation land. And Sen. Jon Kyl (R-Ariz.) is pushing a bill to ban Internet gambling outright.

"It's not only illegal, it's stupid," said Missouri Attorney General Jay Nixon. "You don't know who's on the other end. They want to allow any 14-year-old with their mom's or dad's Visa card to be able to gamble any amounts of money from any house in the state of Missouri."

"It's a crime in Wisconsin to solicit or receive a bet," said Jim Doyle, that state's attorney general. "The law is very clear. If you do it by means of telephone, or telegraph or the Internet, you are violating Wisconsin laws. The Coeur d'Alenes have no greater standing than a bookie sitting out in Minnesota receiving phone bets from Wisconsin citizens."

Nonsense and competitive jealousy, says Matheson in response to the state challenges, pointing out that the tribe has a valid gaming compact with the state of Idaho under the federal Indian Gaming Regulatory Act of 1988 and that the actual servers and other computer and phone equipment for the Internet and telephone operations are located on reservation land.

"We admit we are coloring outside the lines, and I guess you could say it's a gray area, but it's not illegal," Matheson said.

That the Coeur d'Alenes would push the envelope on Internet gambling is hardly surprising for this small tribe that often thinks big. Seven years ago the tribe filed a massive suit against the mining industry for pollution damage to the Coeur d'Alene River watershed, where millions of tons of heavy metals have fouled the river and the breathtaking mountain lake it empties into. The tribe has also gone to court to regain ownership of Lake Coeur d'Alene. Although the tribe was rebuffed by the Supreme Court, which said it could not sue the state of Idaho, the suit was renewed by the Justice Department in a trial that concluded in December and is awaiting a decision.

"Our tribe is progressive," said Stensgar. "There's a purpose much beyond just making money."

With its gambling profits -- about $8 million to $10 million a year from the casino and bingo operations, and potentially far more if its Internet lottery takes off -- the Coeur d'Alenes hope to restore the natural health of the river basin, reacquire as much of their traditional land holdings as possible, and invest in a future that respects their tradition and culture.

Gambling proceeds are invested heavily in education, in elder care, in infrastructure and in buying land the tribe feels was improperly taken from it in violation of the 1873 agreement establishing the reservation.

The signs of change are everywhere: a new $5 million school where youngsters are taught the traditional Coeur d'Alene language on computers; a new clinic and wellness center, the latter now under construction; plans for a huge events center and hotel next to the casino; unemployment down to 15 percent from 55 percent; and dozens of young tribal members going to college.