The Wanderers boss returns to former club Crystal Palace on Saturday, where Butterfield is expected to make his debut for the hosts having moved to Selhurst Park on loan this week.
The 22-year-old was Freedman's first signing at the Reebok Stadium in November and made four starts and as many substitute appearances during a two-month stay.
"At the end of the day Jacob wanted to play matches and I just felt that I couldn't guarantee him games, said Freedman.
"He's got a call from Crystal Palace and he told me - he called me on the phone and he asked me. He was promised more games and I can't really run my team that way. I don't promise my players games.
"I promise my players that if they train hard and they commit to the team then they can play. Hence the reason Jacob left."
Speculation continues to swirl around Palace winger Wilfried Zaha and Freedman, who played such a key role in his development, insists the 20-year-old England international is ready to ply his trade at the highest level.
"I believe he's a Premier League player, I believe he can play in a Premier League team right now and also feel it could be a top four or five Premier League team he could go and play for right now," he said.
"He is a big talent. I understand that Palace are up the top right now trying to get promotion, so you need to be able to try and hold on to players like that.
"Wilfried's a good young man with good talents - feet right on the ground he has - so I'm sure it won't affect him."