Grayson resigned as Blackpool boss on Tuesday morning so that he could take on the Elland Road role, but the furious Seasiders say they are considering legal action.
However, Bates said: "Simon saw Blackpool's chairman and they had a disagreement because he felt he'd done a good job there.
"He wanted this opportunity, and they were stood in his way. He then resigned. As a free agent, we then offered him the job at Leeds."