The Crusaders have explained that financial concerns were behind the decision to withdraw their application to continue in Super League.
The Wrexham club had originally applied to continue as one of 14 Super League clubs for the next three seasons.
But the Rugby Football League said there would now be discussions with the Crusaders about the Welsh club playing in the second tier Championship.
"This has not been an easy decision," said Crusaders chief Rod Findlay.
"But after a lengthy and exhaustive examination of the club's finances, our view is that Crusaders is not sustainable as a Super League club at this stage.
"Every other aspect of the application was strong and we now need to work to ensure that we retain those elements, particularly the community and player pathway programmes in north Wales, an area where no rugby league was played two years ago."
The Crusaders have had a turbulent history, having finished bottom in their inaugural 2009 season and risen to the play-offs in 2010.
This season they have again struggled and are propping up the table in 14th position with five regular league games left.
The Crusaders were placed in administration in November 2010 in a bid to remove the burden of debt they inherited before moving to Wrexham from Bridgend, thought to amount to around £1.25m.
That saw them start this season with a minus-four points deduction under new coach Iestyn Harris, who is also the Wales boss, after the former dual-code international took over as head coach from Brian Noble.
"A lot of people have done a lot of work to get us to where we are now but it has become clear that we cannot continue in our current guise and so a decision was taken to withdraw our licence application," Findlay added.
"It would not have been fair to the players, the supporters, the other clubs or the engage Super League competition for us to proceed with our application. I would like to congratulate those clubs who were successful in their applications.
"In many ways the licensing process helped us realise that the club was not viable in Super League at this stage and I would like to place on record the club's thanks to the Rugby Football League for the practical support they have given us in the last few years.
"I would also like to thank the club owners for their support over the last two seasons.
"We will now sit down with the Rugby Football League to consider our options for 2012 and beyond.
"In the meantime we remain committed to finishing the current season on a high and I am sure Iestyn Harris, his coaching staff and the players will do all they can to move us up the tables."
Wales Rugby League issued a statement that read: "We are shocked and disappointed at today's news.
"In particular our concerns are with the players and staff whose livelihoods are threatened and the growing fan base who have become enthused by the sport.
"We have had assurances from the RFL that they are still committed to their long term strategy to expand the sport, especially in a period which will see Wales competing in the 2012 4 Nations tournament and the 2013 Rugby League World Cup, which Wales will be jointly hosting.
"We would like to emphasise that Wales Rugby League is an independent organisation who are committed to the long term growth of the sport in Wales, and our programmes to grow and develop the sport are ongoing."
Halifax were not awarded a licence to compete in Super League in 2012-14, but Crusaders' withdrawal means Wakefield, who had been widely expected to miss out, have been awarded a licence.
Widnes Vikings were informed four months ago they would be elevated from the Championship, leaving the current 14 Super League teams and Halifax to contest the remaining spots.