The shock vote also puts the dampeners on Sheppard Robson's attempt to challenge Simpson's victory under the Gambling Act, which had forced Manchester City Council to reopen the competition for the casino scheme ( Sheppard Robson shows its hand with bid to design Manchester super-casino ).
The blow comes just weeks after Manchester stunned the gambling world by seeing off bids from bookies' favourites Blackpool and the Greenwich Millennium Dome to land the licence for the country's first large-scale casino development.
Jowell must now re-examine Labour's gambling policy and come forward with alternative - perhaps diluted - options.
Ironically, the Lords' decision could breathe new life into Gensler's Blackpool super-casino scheme, which was rejected in favour of Manchester, as it may have another chance to put forward a bid.
Gensler unveiled images last October of its proposed £350 million 160,000m2 Conference and Casino Quarter for Blackpool.
A Gensler spokeswoman told the AJ: 'This decision gives us hope and also gives Blackpool hope. What we saw happening in the Lords proved that we were not the only ones unconvinced by the Manchester bid and that people thought Blackpool had a very strong business case.
'Blackpool has a strong case for regeneration, while there is already lots of regeneration taking place in Manchester.
'While we are hopeful for the future, there is nothing we can do about the process - it is not up to us after all. We have done everything we could.'