The National Lottery could be split in two in an attempt to make it less likely that Camelot will win complete control of the game for a third successive time.
The controversial proposal from Tessa Jowell, Secretary of State for Culture, Media and Sport, is understood to be the centrepiece of a new Bill to overhaul the lottery, which is expected to be unveiled in the Queen's Speech next month.
The Bill will be rushed through the Commons before the next election, and will allow the lottery's regulator to sell off the main game, Lotto, to one operator while giving another company the right to sell scratchcards.
Camelot's licence, which lasts for seven years, will come up for renewal in 2007 or 2008. Ministers are concerned that Camelot will be left running it until 2016.
That would mean the company will have had control of the lucrative monopoly for a total of 21 years. One Whitehall source said: "We can't allow a situation to develop where there's only one bidder for the next licence. That's a clear government position."
Camelot is preparing to celebrate the first decade running the National Lottery with a series of events.
The last lottery licence was awarded to Camelot after a vicious battle with the National Lottery Commission, the game's regulator, after the commission gave the licence to Sir Richard Branson. The High Court found the regulator had unfairly ruled out Camelot's bid.
Fearful that that row will scare off other bidders, the commission will be allowed to split the games up into different licences if it thinks that that will increase competition for the next licences.
The move will be angrily opposed by Camelot and Sir Richard's group, the People's Lottery. They claim that splitting the game up will confuse bidders and actually be more expensive to operate.
However, Camelot's alternative plan - to set up a simplified, two-stage bidding process - is understood to have now been rejected by ministers.
The National Lottery Commission claims that it would only use its new powers to split the games up if it believed that the City and potential bidders would support the move. If they do not, then only one licence will be offered.
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