The 17-year-old is contracted to Bayern until June 2027, and negotiations over an extension are continuing. However, Bild reports that there is no agreement yet, with the player's long-term prospects in Munich a significant part of the discussion.
Prescott is regarded as one of the club's promising young goalkeepers, but he faces a difficult route into the senior side. Bayern see Jonas Urbig as their long-term successor to Manuel Neuer, while their plans include bringing in an experienced goalkeeper to provide cover.
That could leave Prescott third in the pecking order, a situation that may not appeal to a player whose development depends on regular football.
Chelsea have been tracking his situation, alongside Juventus and several German clubs. The Premier League side's interest was reported earlier this year, while other Bundesliga teams are understood to be offering a clearer route towards first-team opportunities.
Prescott has yet to make his senior debut for Bayern Munich, although he has been included in the first-team matchday squad on six occasions. He joined the club from Union Berlin's academy in 2023 and has progressed through the youth system.
Bayern are not giving up on retaining him. Recent reporting from Sky Sport indicates that the club would like to keep the goalkeeper, but must convince him that there is a credible development plan. A contract extension followed by a loan move could offer one possible solution.
The situation is complicated by the club's plans for the goalkeeping position after Neuer's eventual retirement. Urbig is expected to take over as first choice, while Bayern are considering an experienced deputy rather than promoting another young goalkeeper immediately.
For Chelsea, Prescott would represent a long-term investment rather than an immediate solution. The club already have Emiliano Martínez and Mike Penders among their goalkeeping options, so any approach would need to include a convincing pathway for the teenager.
Prescott's decision is therefore likely to depend less on the financial terms of a new contract than on where he believes he can develop most effectively. Bayern remain in discussions, but with his current deal entering its final months, rival clubs will be watching closely.