The introduction of the National Lottery in 1994 was a significant opportunity to raise new funds for good causes, but it also provided the challenge of introducing effective and efficient regulatory arrangements. Government established the remit of the regulator, who was free to determine the approach to and model of regulation. This needed to reflect the particular circumstances that were in evidence when the National Lottery was launched; that is, a newly established operator, inexperienced players and an inexperienced regulator. It was extremely important that, whatever approach was taken, the key to the success of the National Lottery would be that it inspired confidence among players, and that its reputation would be unquestioned. The regulatory model was therefore designed to reflect the degree of risk that these circumstances posed. It was characterised by a detailed and prescriptive framework which was underpinned by the need for the operator to obtain consent or approval in advance of taking action. There can be no doubt that this approach has proved very effective and confidence among players and other stakeholders is positive. Over time the approach has evolved and the current arrangements are set out in section 2. The Commission must continue to achieve a balance between ensuring that it has control over the operation of the National Lottery, while enabling the operator to exercise the commercial judgement and ability for which it has been awarded its licence. The challenge is to ensure that the regulatory arrangements the Commission has established provide for the optimum performance by the operator. The Commission is aware that the regulatory environment and context within which it operates is evolving and is committed to ensuring that it reflects the best practice emerging from these changes. There is an expectation that regulators will routinely assess the effectiveness and efficiency of their arrangements. It is therefore appropriate to take the time to step back and review whether the current arrangements continue to be appropriate and to look ahead to how the Commission might need to respond and evolve its approach. In doing so the Commission is mindful of the need to renew its focus on the costs of regulation while securing improved outcomes for the National Lottery. The Commission is currently running the competition process to decide who will operate the National Lottery when the current licence expires in 2009. As noted, the Commission recognises that the regulatory context in which it operates is evolving and will continue to do so during the course of the current and next licence periods. This paper is intended to set out the Commission's approach to regulation going forward and, as such, it should be considered to be complementary to the competition process. The Commission welcomes comments on the proposals in section 4 from all those with an interest in the National Lottery, including players and potential bidders for the next licence. The Commission will publish a summary of responses and its final conclusions.