Canberra's $4.4 million, four-year offer to Hudson Young was withdrawn by the Raiders on Monday.
The second-rower remains contracted to the club for 2027, but the PNG Chiefs are set to offer him a deal to join from that season.
Young is due to tour the Port Moresby-based club in the coming weeks.
The Raiders had negotiated with Young since June, increasing both the value and length of their original proposal.
In a statement, the club said: "After discussions with members of the Board and senior management, the Canberra Raiders have withdrawn their latest contract offer to Hudson Young."
The Raiders described the proposal as their largest-ever and said they had done all they could to retain him.
The club said it needed an answer by the end of October to plan ahead, while Young's reported $1.1 million-a-year valuation complicated salary-cap planning.
From November 1, Canberra can pursue other options, but uncertainty over Young's decision makes it harder to plan its spending.
Second-rower salaries have risen, with Jacob Preston reportedly earning about $850,000 a year, Samuela Fainu securing a lucrative Wests Tigers deal, and Liam Martin understood to be seeking around $1 million annually from Penrith.