Camelot has withdrawn its legal challenge against the Gambling Commission’s awarding of the National Lottery licence to Allwyn Entertainment, paving the way for its rival to take up the reins from 2024.

Camelot was set to have its case heard in the Court of Appeal next week after it had lost its first legal bid to prevent the handover in June.

It had been challenging the original decision of the commission in March to award the licence to Allywn largely based on the latter’s pledge to raise more money for good causes.

“By pursuing the opportunity to be awarded the fourth licence, Camelot has sought to limit the risk that good causes or the Exchequer would have to meet damages if the licence award was found by a court to have been unlawful,” said a Camelot spokesman.

“However, it has become clear that the potential damages covered by the undertakings needed for the appeal to proceed would have been too large, and involved too great a commercial risk, for it to be reasonable to provide them.

“For that reason, Camelot has decided to withdraw its appeal in relation to the lifting of the suspension and Allwyn has agreed not to pursue any damages against Camelot in relation to the undertakings given in July. Camelot is no longer seeking to prevent the enabling agreement being signed prior to the procurement trial which will now take place in January/February.

“In accordance with its duties as the operator of the third lottery licence, Camelot will now cooperate with Allwyn and the Gambling Commission to facilitate an orderly transition to the fourth licence.”

Allwyn, which is controlled by Czech billionaire Karel Komárek, said it aimed to raise £38bn for good causes over the 10-year licence period. Camelot has raised £45bn since it began running the lottery in 1994.