The White House argued that the Cuban Baseball Federation was part of the Cuban government, which caused the deal to be nullified because trade with Cuba is currently banned.
The initial deal, which was expected to run through October 2021, allowed Cuban players to sign with clubs under similar rules as other international players from Japan and South Korea.
Players who were over 25 years old would be free to sign with organizations that paid a "release fee" to the Cuban club. Other players could sign minor league deals.
Tony Clark, executive director for the MLB Players Association, said in December the goal was to create a "safe, legal process for entry to our system" instead of defecting to the country while potentially using traffickers, per David K. Li and Mary Murray of NBC Sports.
The U.S. Department of Treasury signed off on the deal at the time.
However, the Trump administration has now decided that the baseball federation is too closely aligned with the Cuban sports ministry. This is a change from the Barack Obama-era policy that decided the two were separate.
"Major League Baseball has been informed of the dangers of dealing with Cuba," a senior administration official said, per Carol E. Lee and Josh Lederman of NBC Sports.
Cuba has produced several notable players in recent years, including Aroldis Chapman, Yasiel Puig and Yoenis Cespedes. However, the new policy would have created more opportunities for younger players and allowed them to avoid the sometimes dangerous and costly process of defecting.
MLB teams were given a list of 34 eligible players from Cuba earlier this month.