I think it has to be something to do with the binary component. I can't see this being an issue if they'd delivered all source code in their project and required users to build the entire thing.
Applications developed under this Agreement for iOS Products, Apple Watch, or Apple TV can be distributed in four ways: (1) through the App Store, if selected by Apple, (2) through the B2B Program area of the App Store, if selected by Apple, (3) on a limited basis for use on Registered Devices (as defined below), and (4) for beta testing through TestFlight.