The next step is a hearing Feb. 26 in Anne Arundel Circuit Court.
Bonnie Kirkland, an assistant attorney general advising the panel, told members that the bidding rules and underlying law provided "ample evidence" that "it certainly was anticipated and expected" that application fees would be returned to unsuccessful bidders.
Democratic leaders in Annapolis accepted the commission's decision with equanimity. Senate President Thomas V. Mike Miller, who has backed slots at Laurel Park, did not offer support for Magna's argument.
"The rules were made clear to all the bidders," Miller said. "Some of the bidders did not abide by the rules."
Del. Anthony J. O'Donnell, the House minority leader, characterized the slots bidding process as a "mess" and called on Gov. Martin O'Malley to "go back to the drawing board" and figure out "how to put Humpty Dumpty back together again."
But O'Malley said he was not overly "bent out of shape" over lackluster bidding for slots because he expects Maryland to receive $3.3 billion from the federal economic stimulus package. That is more money than the state would have received in the next two years from slots even if bidding had gone "swimmingly," O'Malley said.
Fry said the disqualification of the Rocky Gap bid means that the commission will consider rebidding that 1,500-machine license at some point.
Casper R. Taylor Jr., a lobbyist and former speaker of the House of Delegates, said he hoped that there would be another bid. Taylor, who is from Allegany County, represents bondholders of a financially ailing hotel and resort there that state officials had hoped would be invigorated by slots.
Miller called Magna's failure to secure a slots facility a "major disappointment," because the gambling expansion was envisioned as a way to draw people to Maryland horse tracks. But House Speaker Michael E. Busch said that during 10 years of contentious debate in Annapolis, the slots initiative had evolved beyond "basically an entitlement to racetracks."
Baltimore Sun reporters Julie Bykowicz and Laura Smitherman contributed to this article.
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