Allam is attempting to rebrand the club as Hull Tigers in order to increase their commercial appeal to potential sponsors, but the Football Association is set to block his proposal.
In a statement, the governing body said that, at a meeting last Wednesday, its membership committee had made the recommendation to reject the request to the FA council after "consultation with stakeholders within and outside of the game".
The statement added that a full vote would be taken as planned on April 9 and that Hull were able to respond with a new submission, having been sent the written reasons.
Allam later insisted once again that he would walk away from Hull if his plan failed, but moved to deny he would liquidate the club.
While also admitting he would now ask Hull's season ticket holders to vote on the issue, he said: "We will announce a ballot this week, and we will challenge the decision.
"If the FA does not allow our plan, we will walk away, put it on the market to sell the club. We would not put it into liquidation; there is a lot of money at stake. I will get my money when I sell."
Allam's quest has been met with a furious response from supporters and led them into a war of words with the owner.
But the Football Supporters' Federation has praised their campaign, called City Till We Die, and believes the right decision has been made.
FSF chief executive Kevin Miles said: "This is undoubtedly the right decision and credit should go both to the FA and to Hull City fans, who led a tremendous campaign.
"The fans' groups and fanzines who came together under the City Till We Die banner have protected their club's heritage and 110-year-old name with great dignity.
"The FA's decision should also serve as a warning to other owners - such fundamental changes to a club's identity should not be made without the support of the fans."
Allam's son Ehab restated the case for a change as recently as last week, pointing out his family had invested £74m in the club.
"We have nothing left to give and this is the reason why the club has to become financially self-sustainable," he wrote in a letter to the Hull Daily Mail.
"Currently there are six teams in the Premier League with 'City' in their name and, with the exception of Manchester City, all of those clubs are in a similar league position to us, and playing to similar sized crowds.
"We need something that makes us stand out from the pool of teams we find ourselves in when it comes to attracting potential international sponsors, who are simply hoping to use the Premier League, and its global audience, to advertise."