The UK’s Gambling Commission is preparing to settle a £200 million legal claim from media mogul Richard Desmond regarding the awarding of the National Lottery licence, aiming to resolve a dispute that has hindered technological upgrades.

The UK’s gambling regulator is reportedly moving to settle a £200 million damages claim filed by media tycoon Richard Desmond over the operation of the National Lottery. The Gambling Commission has requested a mediation meeting with Mr Desmond’s company, Northern & Shell, proposing an out-of-court resolution to the legal dispute. This meeting is expected to occur in the coming weeks.

While the settlement aims to address the substantial claim, it is believed that the final agreement may not reach the full £200 million initially sought by Mr Desmond.

The decision to pursue a settlement stems from growing concerns that the ongoing legal battle is complicating efforts to upgrade the technology systems that underpin the National Lottery, which is the UK’s largest distributor of charitable funds.

Mr Desmond initiated a High Court challenge after the Gambling Commission awarded the fourth National Lottery licence to Czech operator Allwyn, bypassing bids from Northern & Shell and the incumbent operator, Camelot, which had managed the lottery since its inception in 1994.

Allwyn, controlled by billionaire gas magnate Karel Komárek, assumed control of the lottery in February. However, its tenure has faced difficulties, including delays in transitioning to a new technology provider. The company’s plan to introduce a new IT system has been repeatedly postponed, with further delays anticipated.

This technological overhaul is critical to Allwyn’s strategy to launch new games and double the lottery’s contributions to good causes from £17 billion to £34 billion over the 10-year licence period.

It is understood that the Gambling Commission’s eagerness to settle is partly due to expectations that the IT upgrade deadline will need to be extended again. Officials are reportedly reluctant to grant another extension while Mr Desmond’s legal action is pending, fearing it could strengthen his claim that awarding the licence to Allwyn was a mistake and that the auction process was flawed.

In February, Northern & Shell filed a procurement lawsuit against the Gambling Commission over its decision. During a High Court hearing in June, the company described the licensing process as “seriously flawed,” accusing the Commission of giving “unfairly favourable treatment to Allwyn.” Mr Desmond has previously questioned Allwyn’s suitability, stating they have “no experience in the UK.”

Industry experts suggest that Allwyn’s new systems should have been operational when it took over the licence. Robert Chvátal, Allwyn’s chief executive, had warned of potential delays even before the transition. The company missed its summer deadline and is now reportedly targeting February 2025, though insiders believe this may be further postponed, potentially impacting donations to good causes.

Allwyn has attributed some setbacks to a legal dispute with the former IT provider, International Game Technology (IGT). Although IGT’s legal challenge was dismissed by the High Court in 2023, the company continued to seek damages until January of this year.

Extended delays may hinder Allwyn’s ability to meet its ambitious fundraising goals. The company is already falling short of sales projections, with turnover expected to be significantly less than the £8.2 billion achieved by Camelot in its final year.

The National Lottery remains one of the UK’s most lucrative public sector contracts and its largest source of funding for sports, heritage, and charitable causes across the country.

A spokesperson for the Gambling Commission stated: “In accordance with the order of the court, at all stages the parties must consider settling this litigation by any means of alternative dispute resolution. Naturally, the Commission will continue to have regard to those requirements.”

An Allwyn representative commented: “We are investing more than £350 million in the biggest technology upgrade in the National Lottery’s history, and we are working towards switching over from the existing legacy systems to our new modern platform. Once it is live, we will be able to transform the way customers play the National Lottery and, crucially, drive even more returns to good causes.”

A spokesperson for Mr Desmond declined to comment.