Competition in higher education is intensifying worldwide and gaining increasing scholarly attention. However, it is not always easy to observe how competition actually takes place. Our research focuses on one example where competition becomes not only visible but also analyzable: State-led funding contests exemplified by the Excellence Initiative (EI) in Germany. While funding contests in Germany have been established as contests between universities, at the same time they have changed the rules of competitive games between federal states. In our contribution we demonstrate and analyze the multiplicity of competition at the interface between universities and federal states. By reconstructing how federal states play different roles in relation to universities' performances in funding contests, we shed light on a twofold relationship. On the one hand, federal states are folded into competition between universities because they support 'their own' universities with advice and financial resources when the universities prepare to participate in the contests. The federal states are therefore important for the positions universities can take as organizational actors in competition. On the other hand, universities are folded into the competition between federal states because the states at least partly take agency when they view their competitive position vis-à-vis the other federal states as being dependent on 'their' universities' performance in the contests. In this context, they become competitive actors.