Nevada Republicans suffered a serious blow Wednesday when their first announced challenger to Senate Majority Leader Harry Reid (D-Nev.) was indicted on four counts of misappropriation and falsification of public records.

The charges, handed down by a Clark County grand jury, accuse Lt. Gov. Brian Krolicki of committing the crimes when he he was state treasurer. Krolicki's then-chief of staff, Kathryn Besser, was also indicted in the case.

The news is hardly unexpected. Krolicki told reporters he had been advised of the pending indictment in late November, part of what he calls a "witch hunt" by Nevada Attorney General Catherine Cortez Masto. Masto, a Democrat, refused to comment on the case, citing privacy laws.

Before the indictment Krolicki was seen as a serious contender against Reid. The National Republican Senatorial Committee is expected to take on Reid, whose approval ratings are less than stellar, just as Democrats ran hard against Senate Minority Leader Mitch McConnell (R-Ky.) this cycle.

"Even though he is taken lightly by a lot of people, I don't think Reid takes [Krolicki] lightly, or at least took him lightly," said Jon Ralston, Nevada's top political handicapper.

Now, that's all changed, both Ralston and national Republicans say. "As a political commodity, his value is about what the Dow is right now," Ralston said.

And a senior Republican aide close to Senate leadership noted "You are not going to beat Harry Reid with a guy who has an indictment hanging over his head."

Krolicki has said he will not resign his state's Number Two slot, and whether he proceeds with his Senate campaign remains to be seen. It is almost certain, though, that Republicans will now go shopping for a new candidate.

The two GOP names most often floated as top-notch challengers, however, have had difficult years of their own. Rep. Jon Porter, who represents Southern Nevada's 3rd district, just lost his bid for a fourth term to state Sen. Dina Titus; and state Sen. Joe Heck lost his seat by fewer than 1,000 votes thanks to a Libertarian candidate.

Ralston said both Porter and Heck will consider a race against Reid, but having lost will set them back.

Many Nevada political watchers expect troubled Republican Gov. Jim Gibbons to either step down or face a spirited primary challenge after a rocky personal and political term punctuated by a very public divorce and allegations of sexual harassment during his campaign. 

That challenge could come from Rep. Dean Heller, who is said to be considering a bid for the governor's mansion in 2010. Heller may also come under pressure to consider a run against Reid.