Here, all but one or two of the players from the entire high school softball program (freshmen through seniors) played on the head coach's private travelball team. They are told to do so as part of the HS tryout process. My DD is in the doghouse because she decided that she wasn't going to as soon as the high school season was over. This is what makes me very sensitive to njx2's situation. Again, it is a private-public conflict of interest. A private softball organization should not have full control of a high school softball program.
If it's legal, I can see where this could be a positive thing - if the coach of it were doing it to ensure that high school players have a good option to play travel ball. But if it's a thing where it's understood that your route to the varsity goes through this team, then yes, that's not a healthy situation, at all.