So, I have finally figured out how to play local files on your iPhone. Follow these steps:
1. Disable firewall on your laptop or desktop. Specifically for Spotify.
2. Connect your iPhone to your laptop or desktop.
3. Connect your laptop or desktop to your iPhone's personal hospot. No wifi, just your iPhone's personal hotspot.
4. Go on the spotify app on your iPhone
5. Go to Your Libary
6. Click the settings button at the upper right hand corner (looks like a wheel)
7. Click Music Quality
8. Scroll down and make sure "Download Using Celluar" is on green.
This should work! If not, make sure that the download button is green on your desktop spotify playlist, and its available offline.