From what I read, the codebase is using Nintendo proprietary sdk libraries in its codebase. So that is technically Nintendo IP. The fix is to switch to open source implementations of those libraries. But the dev is hesitant to put in that work without Valve's approval, because if he does that work Valve can still fuck him over for using their Portal IP, and an n64 game isn't distributable on Steam, so there's literally nothing in it for Valve to bless/support it. So he's worried that all that effort would be for naught. And Nintendo already threatened Valve in the past when Dolphin was attempting to distribute on Steam, and Valve backed down. So the theory is that Valve doesn't want to piss off the big N in any way legally.

Now, we can ask ourselves why almost 30 year old sdks are still valuable to Nintendo, but unfortunately copyright law being what it is, it's technically illegal to do what the dev did. He should have seen this coming and used the open source libraries instead of the Nintendo proprietary ones. But I say this not knowing how good those open source libraries are, they could have problems, be incomplete, etc., or maybe not exist when he started the project. But either way a dev should have known using Nintendo IP in any form is fraught with peril.