• Julie Inman-Grant, Commissioner of Australia's eSafety, said in a statement that after weighing "multiple considerations," she decided discontinuing the proceedings would "likely achieve the most positive outcome for the online safety of all Australians, especially children."
• X's Global Government Affairs team welcomed the news, saying in a post that the firm was "heartened to see that freedom of speech has prevailed."
• Musk also posted via X shortly after the announcement, saying: "Freedom of speech is worth fighting for."

Australia on Wednesday announced it had dropped its legal battle against Elon Musk's X to have graphic footage of a church stabbing in Sydney removed from the social media platform.

The dispute was widely seen as a test case for the Australian government's ability to enforce its online safety standards on the social media giants.

Julie Inman-Grant, commissioner of Australia's online safety regulator, said in a statement that after weighing "multiple considerations," she decided that discontinuing the proceedings would "likely achieve the most positive outcome for the online safety of all Australians, especially children."

"Our sole goal and focus in issuing our removal notice was to prevent this extremely violent footage from going viral, potentially inciting further violence and inflicting more harm on the Australian community. I stand by my investigators and the decisions eSafety made," Inman-Grant said, referencing Australia's independent regulator for online safety.

X's Global Government Affairs team welcomed the news, saying in a post that the firm was "heartened to see that freedom of speech has prevailed."

"Freedom of speech is worth fighting for," Musk also posted on X, shortly after the announcement.

Bishop Mar Mari Emmanuel was stabbed during a livestreamed sermon in Sydney in the middle of April that was widely circulated online, racking up hundreds of thousands of views. He survived the incident.

Following the attack, which was declared a terror incident by police, Australia's eSafety commissioner was granted a temporary legal injunction ordering X to hide posts that showed the footage.

Musk challenged the earlier court order as an assault on free speech.

Last month, the Musk-owned social media platform won a reprieve in Australia when a court refused to extend a temporary order blocking videos of the Sydney church stabbing globally.

War of words

The legal dispute prompted a war of words between senior Australian officials and Musk.

In an interview in late April, Australian Prime Minister Anthony Albanese called Musk an "arrogant billionaire" who thinks he stands above Australian law.

Referring to Albanese, Musk responded on X: "I do not think I'm above the law. Does the PM think he should have jurisdiction over all of Earth?"

He added, "This platform adheres to the laws of countries in those countries, but it would be improper to extend one country's rulings to other countries."

Musk also described eSafety Commissioner Inman-Grant as a "censorship commissar" for pursuing a global ban of the graphic footage.

Inman-Grant told ABC News that Musk's attack against her resulted in an online pile-on from his millions of followers, along with death threats and the online exposure of personal information of her children.

— CNBC's Sumathi Bala contributed to this report.