Cardiff Blues chairman Peter Thomas claims the Welsh regions and Welsh Rugby Union are in a "crazy" competition to sign Wales' top players.
Blues full-back Leigh Halfpenny has signed for French side Toulon, and he is understood to have been one of six players identified for a possible central WRU contract, while the Blues also wanted to keep him.
"Regional Rugby and the Welsh Rugby Union are in competition and it's difficult," said Thomas.
"It's crazy," added Thomas.
He added he was "devastated" to see 25-year-old Halfpenny leave.
The WRU would be likely to dispute Thomas's claims it was competing with the regions for top players.
The governing body and Wales' four regions - Cardiff Blues, Newport Gwent Dragons, the Ospreys and Scarlets - are currently in a bitter dispute over the exodus of Welsh players, funding and a proposed Anglo-Welsh league.
The WRU has tabled what it calls a Rugby Services Agreement with the regions. This legal document proposes central contracts if the parties agree.
Halfpenny is understood to be one of six proposed Welsh internationals on a list for a central contract. However, he signed for the Heineken Cup champions Toulon on Thursday.
Lock Alun Wyn Jones became the first of the six to pledge his future to the Welsh regions when he signed for the Ospreys on Friday.
The futures of Wales captain Sam Warburton, prop Adam Jones, Scarlets pair of fly-half Rhys Priestland and centre Scott Williams, who are all out of contract in the summer, are still to be resolved.
Players are also uncertain over what competitions they will be playing in next season, with a rival European competition to the Heineken Cup on the table and the possibility of the Welsh regions also playing in an Anglo-Welsh competition instead of the Pro12.
Thomas is adamant the status quo is not an option and the current impasse is not helping anybody in Welsh rugby.
"It is just ludicrous and it has to change, because the public are standing up and saying: 'We don't want this,'" said Thomas.
"We have to change because the product is not selling.
"With regards to Leigh Halfpenny, he has gone to Toulon, a club in a competition where they generate more money than the Welsh Rugby Union does.
"It was impossible to keep him without the Union's support."
Thomas said he was devastated to see Halfpenny leave the Arms Park after seven years in the Welsh capital.
The Blues chairman claimed the money being generated by the French and English clubs was making it impossible for the Welsh regions to compete.
"He has been with us seven years," said Thomas.
"He has been a friend, he has developed into an exceptionally world class player.
"When you put so much effort into a player like that it is devastating to see him go. Absolutely devastating.
Thomas claimed Welsh rugby could not compete with French rugby's TV deal of 70m euros-a-year and English rugby's deal of £30m-a-year, when next year's Pro12 deal is £5.5m.
"You just cannot compete."