The Maryland state lottery contract, which, we previously reported was awarded to the highest bidder with the least technical capability to handle the state’s lottery system, is getting more scrutiny than the lottery director and the winning company could possibly want.

The Associated Press and the Baltimore Sun are now reporting that the contract is being “protested,” legalese for challenged, by rival bidders. The challenge to the award of the is based in part upon a peculiar insertion in the agreement.

The Associated Press reports that “Maryland lottery officials inflated a $262 million, eight-year information technology contract for monitoring wagers to include kinds of internet gambling that aren’t allowed under state law, according to one of the losing bidders.”

This news has alarmed some in Annapolis. According to the Sun, Sen. Edward Kasemeyer, the Senate’s chief budget writer, says the legislature is “strongly opposed” to legalizing online gaming.

Meanwhile, Maryland is currently facing an $800 million revenue shortfall, which is causing some in Annapolis to wonder how the highest bidder – by $50 million – won the contract in the first place.

One industry insider says state Lottery Director Gordon Medenica’s past professional association with Scientific Games could become an issue as the contract comes under closer examination.

“The multiple bid protests and legislative scrutiny will surely be uncomfortable for Gordon Medenica,” the source said. “Medenica was a senior executive for a New Jersey business venture that was partially owned by Scientific Games. Given this direct and well-known relationship, it is curious that he didn’t recuse himself from the whole bidding process.”

Annapolis is getting increasingly queasy over this deal.