The AFL Commission has knocked back Melbourne's request for a priority pick in the November 27 draft.
Melbourne won four games in 2014 under first-year coach Paul Roos after claiming just two victories in 2013.
Rules introduced in 2012 allow the AFL Commission to award priority picks on a discretionary basis and determine where that selection occurs.
The AFL's website reported on Tuesday the Demons are still in line for a compensation pick should James Frawley leave the club as expected as a free agent.
After finishing 17th, the Demons already have the No.2 pick in the draft.
Ex-Demons champion David Schwarz says the club shouldn't be relying on handouts.
"Melbourne have won 10 games in three years and the AFL have knocked back their application. I think rightfully so," Schwarz told Radio SEN on Tuesday.
"The priority pick should be there for extreme circumstances not for poor recruiting, not for poor management, not for running your club like a basket case."
The AFL released a statement, saying there were a number of reasons why the Commission knocked back Melbourne's request.
It noted the Demons' four wins were double what they achieved last year and their percentage also improved.
They beat finalists Essendon and Richmond and lost three games by only nine points or less.
The league also pointed to Melbourne's bad run with injuries this season and their good crop of young talent.
Adding to the greater stability at the club, last week Melbourne appointed former Adelaide star Simon Goodwin to a five-year coaching deal where he will eventually take over from Paul Roos.
"The AFL concluded that while Melbourne has a poor on-field record in recent times, this does not of itself constitute `exceptional circumstances' or a justification for awarding priority draft selections," the league said.
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