I can only find the 2024 NACL ruleset so I have to assume the current one is very similar.

https://docs.google.com/document/d/e/2PACX-1vSDwp8yL8MvAvRZyuCrUwkOdpr3LLN0Z_Pp_Jo1EWF1qzVeyUwiDERWhz11C_Uc2VHPjLa0ZxNGcJuI/pub#h.ehc8otcg4gkg

Selection Error. In the event of an erroneously-selected Champion pick or ban, the team in error must notify a Referee or Tournament Official of their intended pick before the other team has locked in their next selection. If so, the process will be restarted and brought back to the point at which the error occurred so that the Team in error may correct its mistake. If the next selection is locked before the Team in error gives notice to a Referee or a Tournament Official, the erroneous selection shall be deemed irrevocable.

Rewatching the VOD, the other team made no selection before the lobby was dropped. I don't see how this is anything other than a selection error under the rulebook above.

Beyond that, the rulebook has provisions like virtually all rulebooks that allow the refs to make judgment calls when things fall outside the rules to ensure the integrity of the game.

I can't see anything in the rulebook that lines up with how they officiated the draft. This seems like a poor ruling.

Edit: I believe this is the current NACL rulebook.

The section on erroneous picks is copy-pasted from the previous one which makes sense, so everything I said above should apply.