Some of our end-users experience the same issue with offline content keys. We had to disable content key persistence support until we fix the issue.
I even reproduced it once myself with a valid (ie. not expired) offline content key: once providing the offline content key to the AVKeyRequest, the system immediately fails the AVPlayerItem (no automatic retry at AVContentKeySession level) with error CoreMediaErrorDomain:-42650. It is systematic and can only be solved by deleting the offline content key from the app content key store (which forces the app to retrieve a new content key from the KSM).
Unfortunately, offline content keys lease duration being 30 days, it is not easy to reproduce the issue and provide logs.
Could Apple provide more information on this error specifically and on CoreMediaErrorDomain errors in general? The lack of documentation is very annoying and developers can only empirically list errors when they occur (examples: https://developerinsider.co/fairplay-streaming-error-codes/, https://developer.bitmovin.com/playback/docs/system-error-codes-ios).