The Nashville owner sent a letter to the NHL advising it to no longer consider Balsillie as a prospective owner of the team.
The league source told CP that Leipold cited the absence of a finalized sale agreement and Balsillie's desire to relocate the franchise to Hamilton as reasons for his decision.
A message was left with Balsillie's lawyer Richard Rodier.
Leipold and Balsillie, the co-CEO of BlackBerry maker Research In Motion, agreed to a term sheet for the transfer of ownership of the team on May 24.
Balsillie had promised to pay between US$220 million and $238 million for the Predators and a deadline of June 30 was set to complete the sale.
In the meantime, Balsillie started a process to move the Predators to Hamilton should a potential out in the team's lease with the arena in Nashville be exercised after the sale's completion. That was something that surprised Leipold, according to a source.
Balsillie accepted thousands of deposits on season tickets for an NHL team in Hamilton, a move some in the league's head office privately questioned.
At a board of governors meeting in New York earlier this week, NHL commissioner Gary Bettman called talk of moving the Predators "premature."
"Currently there isn't a fully completed application before the board of governors," Bettman said on Wednesday. "As a result, I think people are getting a little bit ahead of themselves on this entire issue.
"It isn't in any shape or form close to being ready for consideration as it relates to approval of an ownership change. I'm not exactly sure why people are focused on the Nashville Predators being anywhere other than in Nashville at this particular point in time."