Legal wrangle may strip £1bn from Lottery funds

The former chief executive of Camelot has warned that a looming court row over the loss of its National Lottery licence could drain up to £1billion otherwise destined for good causes. 

In a letter to the Gambling Commission seen by The Mail on Sunday, Dame Dianne Thompson urged the regulator to delay triggering a switch to a new operator, which she says could avert a funding disaster. 

The legal bombshell would more than halve the annual £1.9billion that the lottery distributes to a wide range of causes from local community projects to supporting Olympic and Paralympic contenders. 

In March, the Gambling Commission named European lottery operator Allwyn – backed by Czech billionaire Karel Komarek – as the preferred applicant for the fourth National Lottery licence, beating Camelot. 

The commission aims to anoint Allwyn with an Enabling Agreement ‘as soon as possible,’ the letter says. A month ago, Camelot, which has operated the National Lottery since it began 28 years ago, declared its intention to take the commission’s decision to the High Court. 

Camelot’s chief executive Nigel Railton said last month he had been ‘shocked’ by the turn of events that would see the licence snatched away. He said the watchdog ‘got this decision badly wrong’. 

Railton added: ‘Despite lengthy correspondence, the commission has failed to provide a satisfactory response. We are therefore left with no choice but to ask the court to establish what happened.’ Thompson, chief executive from 2000 to 2014, said in the letter that potential damages could equate to up to a decade of Camelot’s profits. 

She said that delaying the transfer of the ten-year licence was a ‘relatively straightforward solution’ that would ‘avoid any unseemly and unnecessary haste in legal proceedings and remove the risk to good causes’. 

Thompson said in 2000 when a similar legal dispute arose over the licence – this time involving Richard Branson’s People’s Lottery – that ‘legal proceedings were allowed to conclude appropriately, transition to the new licence was successful, and good causes did not miss out in any way’. She said: ‘The Gambling Commission could award an interim licence to Camelot for a further six months. 

‘The transition timeline would remain unaltered, the legal case could be properly heard and – critically – any risk of a massive bill for good causes would be removed at a stroke. 

‘I fully understand the Commission’s enthusiasm for ensuring that their preferred applicant has as much time as possible to enact a successful transition. 

‘Transition is a complex and risky process – as I know only too well – that will clearly not benefit from a truncated timeline.’ She added: ‘I’m equally sure that no one – least of all the Gambling Commission – would wish to risk taking up to one billion pounds from good causes, particularly during a cost of living crisis.’ 

The Gambling Commission said: ‘In order to protect the integrity of the process, we will not be able to discuss the specifics until litigation has concluded.’ 

But it added: ‘We are confident that we have run a fair and robust competition. A delay to the implementation of the [next] licence poses a significant risk which could diminish funds going to these causes.’

Allwyn is due to take over the running of the National Lottery in early 2024. Camelot is said to be unhappy that the commission’s analysis applied the same level of risk to passing the licence to Allwyn as remaining with Camelot. 

There will be a preliminary legal hearing this week which will decide on the likely course of the main court case, which is expected to be in October. 

The initial hearing will decide whether or not damages will be a suitable award if Camelot loses the main court case. Camelot hopes the legal action paves the way for it to retain the licence. 

Last month, it emerged that Komarek is set to a receive a $750million (£572million) windfall when he lists his gambling company on the New York Stock Exchange. 

He is expected to launch Allwyn on the exchange through a deal with a special purpose acquisition company. The 53- year-old has amassed a £6 billion fortune and has a jet-set lifestyle. Komarek, his wife Stepanka and their four children move between homes in the Czech Republic, Palm Beach in Florida, and the ski resort of Verbier in the Swiss Alps. 

Canadian-owned Camelot says it has returned £45billion to 660,000 causes in the UK during its tenure of almost three decades. 

It has come under pressure in recent years after profits rose faster than returns to good causes. That led to a rebuke from the National Audit Office in 2017.

But the company stresses that profits – about £95million in each of the past two years – amount to 1 per cent of ticket sales. 

Funds to good causes fell to below £1.5billion in the year of the NAO’s rebuke. But the sum rose to £1.88billion last year on the back of record ticket sales of £8billion. 

It is understood that Allwyn has pledged to donate more than £30billion over the course of its licence – which could be just the first tenure if it succeeds with a renewal. 

It wants to offer more super-national lotteries, similar to EuroMillions where larger jackpots pull in more players. On top of that, it has promised new technology that it hopes can win over younger players who favour online betting. 

Camelot declined to comment.