Dortmund, who finished the match with nine men after red cards to Marco Reus and Marius Wolf needed a win to overtake Bayern Munich at the top of the Bundesliga table with three matches to go.
Asked on Sky Germany if the title race was over, Favre said: "yes, of course".
Favre further questioned the referees' decision to award Schalke a penalty for their equalising goal terming the new handball rules as the biggest scandal in football.
"Football is making itself a laughing stock.
"What do they want players to do, cut their arms off?"
"The people who invented these rules, I don't know how they look at themselves in the mirror."
Read more: Borussia Dortmund suffer massive title blow