Defoe believes he has a " trigger" clause in his contract that entitles him to renegotiate his deal with Spurs after a certain number of appearances for England.
Since his £7m move from West Ham he has become one of the most promising players in Sven-Goran Eriksson's team, playing eight times.
His senior England teammates are all paid at least double what Defoe is on.
Levy and his board of directors feel it is too soon to renegotiate the terms of his deal. But if the issue cannot be resolved, Defoe could begin to attract interest from the country's top clubs.
Spurs denied he has a contractual right to renegotiate his deal based on England appearances. Instead it is thought there is a verbal agreement between the club and the player.
"There is no clause in Jermain's contract which relates to any number of England appearances and the right to renegotiate his contract as a result," a club spokeswoman said.
"Jermain has been with the club for less than a year of a five-and-a-half-year contract so it's premature to talk about renegotiating that contract."
At the same time Spurs sources admit that, as with all players, if the price was right they would be prepared to sell the 22-year-old in the January transfer window.
