The gambling regulator will ask a court to force through its award of the next national lottery contract to the Czech-owned newcomer Allwyn, in a move critics say risks depriving good causes of up to £800m.

The Gambling Commission awarded the fourth national lottery licence to Allwyn earlier this year, triggering an immediate legal challenge from the incumbent Camelot and the media tycoon Richard Desmond, who also lost out in the competition for the lucrative licence.

The losing bidders are taking their case to the high court in October, with the Gambling Commission barred from moving forward with preparations to transfer the licence to Allwyn in the meantime.

On Wednesday, lawyers for the regulator will ask a high court judge to remove the temporary block that prevents it from signing an “enabling agreement” with Allwyn, which they will say risks delaying the transition and endangering payments to good causes.

But a source familiar with the legal battle said it was the regulator’s haste to push through Allwyn’s licence that risked diminishing payments to charities and sporting institutions.

They said the commission’s request to lift the block would, if successful, make it all but impossible to reverse the award to Allwyn, ultimately owned by the Czech billionaire Karel Komárek.

Camelot, its technology supplier IGT and Desmond would still go ahead with legal challenges but would effectively be suing for damages, rather than for the decision to be overturned.

The combined damages claim could cost the regulator up to £800m, they said, including costs incurred during the lengthy bid process.

Camelot would also seek compensation for income it would have made from running the lottery between 2024 and 2034.

“The Gambling Commission is essentially gambling with money meant for good causes,” said the source, adding that it would be more prudent for the commission to extend Camelot’s existing licence for a further six months, to allow the trial to go ahead.

Should Camelot succeed in its challenge, it would then continue to operate the lottery and no damages would be paid. If it loses, the award to Allwyn would stand.

The commission has granted Camelot a temporary extension before, when Sir Richard Branson launched an ultimately unsuccessful bid in 2000 to overturn a decision to give the Canadian-owned company the second national lottery licence.

A spokesperson for Camelot declined to comment.

A Gambling Commission spokesperson said: “We are confident that we have run a fair and robust competition.

“The lottery is a national treasure and since launching in 1994 players have collectively raised more than £45bn for 660,000 good causes across the UK, transforming lives and contributing to the arts, sport, heritage and communities.

“A delay to the implementation of the fourth licence poses a significant risk which could diminish funds going to these causes.

The former Camelot chief executive Dame Dianne Thompson wrote to the commission last weekend warning it to abandon its attempt to move forward with Allwyn’s licence, to “avoid any unseemly and unnecessary haste in legal proceedings and remove the risk to good causes”.