NFHS Rules
 

Team A is trying to run a play with the guard pulling. QB tries to hand the ball to his running back. The ball hits on the hip of the running back and pops loose. While the ball is in the air (only inches from the running back) the OL guard that was pulling catches the ball and runs with it. The Referee stops the play and says the OL can not advance the ball. No penalty was called. What is the correct ruling.

Was this in a weight-limited league where the interior lineman was permitted to play only by virtue of meeting a higher weight limit for those positions? If so, ball dead in his possession is the proper call.

The description of the play doesn't read like a planned loose ball in the vicinity of the snapper, but if the referee thought it was, then dead ball on possession gained.

Otherwise, inadvertent whistle, team A's choice to replay the down from the previous spot or accept the result.