After selling 3,000 tickets in just two days, Loeb's Restaurant lost its lottery license because the city's lottery board found the restaurant is in a building where, under federal law, gambling is prohibited.

According to laws laid down by Congress when the D.C. lottery was approved, no business may sell tickets if it is in historic Georgetown or is "in, adjacent to or abuts the federal enclave," explained Douglass Gordon, executive director of the D.C. Lottery and Charitable Games Control Board.

Loeb's is housed in the 15th-and-I-street corner of the massive Lafayette Building, which occupies the block bounded by Vermont Avenue, 15th, H and I streets NW. At the opposite end of the building from Loeb's, one corner of the Lafayette Building is diagonally across the street from Lafayette Square, a federally owned park in front of the White House.

Lottery Board Chairman Brant Coopersmith said last week the board received a complaint from the General Services Administration, the agency that owns the Lafayette Building, contending that because one corner of the building faces Lafayette Square, lottery tickets should not be sold anywhere inside it.

He said the board had not considered Loeb's location to be a problem when it approved its request for a license, but after considering GSA's complaint the board decided late Friday afternoon to revoke the delicatessen's lottery permit.

"GSA complained to us about violating a law; we had to comply," Coopersmith said yesterday. GSA officials could not be reached yesterday for comment.

Gordon said that in many cases, defining the federal enclave is "a matter of interpretation." The board has a map, he said, but the boundaries are quite jagged and often unclear.

He said while the board has tried to be careful about not licensing businesses that are in the restricted areas, the same thing that happened to Loeb's could happen again. Decisions on whether to license stores in questionable locations must be made "one by one," he said.

"Nobody is as upset as I am," said Sigrid Loeb, who with her husband owns the restaurant. Loeb said that when she applied for the lottery vending license, she "went through all of the proper channels . . . . It was checked out by our lawyers and they found that we were not part of the federal enclave."

Loeb said that since she sold the last of her lottery tickets on Thursday, numerous customers have gone elsewhere. "Now," Loeb said, "what was supposed to help small business in the city is hurting it."

"Our position is that the building does not affront or abut the federal boundary," said the restaurant's attorney. "They are a good block away from the park, and not in sight of the park. We will see this through to the courthouse."

Coopersmith said there was a great deal of irony in GSA's fighting the sale of lottery tickets. He pointed out that, as of Friday, there had been 18 winners of $10,000 tickets and $36,000 of that money has been withheld for federal taxes. "The federal deficit will be positively affected by this," he said. "They're not really opposed to accepting that money from us."

Coopersmith also said that the District's first lottery has been so successful that the board expects to sell all of the 10 million tickets within about three weeks and has ordered an additional 10 million tickets to continue the game.