Gallacher was on his way to Sunderland this summer after a deal was in place for him to leave Liverpool in the window.
Sunderland had agreed on the terms of the deal that would have seen Liverpool release the 22-year-old from his contract, which would have allowed him to join Sunderland on a free transfer.
As part of the agreement, Liverpool would have held a sell-on clause, with a substantial fee being due when Sunderland cashed in on him in the future.
But it has been claimed that the deal has been called off and Sunderland have pulled out of the proposed agreement.
With the Black Cats out of the picture, Gallacher will have to find another club if he is to leave Liverpool this summer.
Sunderland manager Lee Johnson wants to sign a left-back and he has been considering a number of defensive options.
With Gallacher not arriving on Wearside, there is now hope that Denver Hume could sign a new contract to stay at Sunderland.