Judges are deciding whether to allow a judicial review of the commission’s decision to grant licences to the 51 community interest companies that make up the Health Lottery, which was launched in October by the media owner Richard Desmond.
Camelot, the National Lottery operator, is asking for the decision to be overturned because it feels that the Health Lottery is unlawful and is attempting to commercialise society lotteries on a scale and in a way that breaks both the sprit and the letter of statute and regulation.
In the High Court yesterday, James Goudie QC, representing the Gambling Commission, said the regulator had acted "effectively and reasonably" on its concerns about the legality of the Health Lottery and the 51 community interest companies operating as society lotteries under the brand.
He said the commission was giving the Health Lottery and the CICs time to improve and comply with the act and regulation.
"Much has been made of the fact that the commission still has concerns nine months on," he said. "We are having a review in relation to marketing and promotion.
"We are giving the CICs the opportunity to correct the problems, but the commission has absolutely not shut the door to reviewing the licences of the CICs on other grounds."
Presenting the case for Camelot, Lord Pannick QC told the court on Wednesday that the only "reasonable and lawful response" to concerns held by the Gambling Commission about the licences given to the CICs was a statutory review.
He said the commission’s decision to carry out a review of the marketing and promotion of the lottery did not go far enough.
In court yesterday, Goudie said: "Camelot thinks we’ve drawn the line in the wrong place and been too generous in the amount of time given to let things develop. But that is surely a matter for the commission. We proceed with formal enforcement only as a last resort, rather than on schemes that are capable of being repaired.
"Progress is being made, even if it is slow. It is not an abdication of responsibility; it is best regulatory practice. We’ve encouraged the CICs to continue to move further away from the border line, and we’ve engaged effectively and reasonably."
Pannick had used emails between the commission and the Department for Culture, Media and Sport as evidence that the regulator had serious concerns about the Health Lottery. He quoted the commission’s chair saying the scheme was "on the borders of technical legality – the gambling equivalent of a tax-avoidance scheme that exploits loopholes in the legislation".
Goudie said Camelot had made the email exchanges "deceptively simple".
"It is based on the entirely false premise that the commission believes the scheme to be unlawful. It does have concerns, but that is not the same thing as concluding that it’s unlawful."
"The commission was fulfilling its responsibility to advise government by drawing attention to what might well be regarded as a loophole so it can then take steps to block the loophole."
The commission has also argued that Camelot left it too late to apply for a judicial review because it should have acted within three months of the licences being granted.
Submission from the Health Lottery and the CICs are expected today.