After a career as an independent marketing professional,[3] Neil Levine founded Penalty Recordings, launching it in 1995 as a joint venture between himself and Tom Silverman.

[7] Levine sold the remaining 50% of Penalty to Tommy Boy in 1999,[8] staying on long enough to complete the transition before moving on to eventually become Vice-President of Urban Marketing and Artist Development at TVT Records.

[3][6] The re-established label featured J-Live, The Beatnuts, Ali Shaheed Muhammad, MC Eiht, and Zion I among its roster,[4] many of them with their own imprints on Penalty.

Penalty was also one of the partners involved in producing and marketing the AND1 Mixtape Tour series of DVDs, featuring gameplay and interviews of streetball players.

The label has also put out releases by Lil' Mo,[13] Joell Ortiz, BeatKing, Hi-Rez and EMC, which includes Masta Ace, Wordsworth and Strick.