The protest was lodged after the owner-skipper of runner-up Black Jack Peter Harburg alleged Wild Oats had infringed race rules by not having its automatic identification system (AIS) switched on for the entire race, leaving rivals in doubt as to its exact position.
Based on the claim, the Sydney-Hobart race committee lodged the protest, but an International Jury, sitting in Hobart, ruled it out of order.
"The Race Committee's investigation was prudent, however in these circumstances, for the protest to be valid under the Racing Rules of Sailing, a competitor with information about a potential rule breach must lodge the protest," read a statement on the Sydney to Hobart official website.
The decision was greeted with relief by the connections of Wild Oats XI and its skipper Mark Richards.
"I think common sense has prevailed," he told Australian television network ABC.
Wild Oats XI record ninth line honors victory had come after a four-year hiatus, with its 2014 win followed by forced retirements in 2015 and 2016, the death of owner Bob Oatley and then more controversy last year when Richards and his crew were stripped of victory.
Crossing the line first, a protest by runner-up Comanche over a near-collision near the start was upheld, with Wild Oats XI controversially given a one-hour time penalty and relegated to second place.
With the demotion and other near misses still fresh in his memory, it was an emotional Richards that gave his first reaction after winning a four-strong battle of the supermaxis to take this line honors prize.
"Redemption for us, that is for sure. Last year, it was so disappointing," Richards told reporters.
"Whether people like it or not, it is Wild Oats XI's 10th time over that line first, no matter what anyone else says... After an event like last year and to come through and redeem yourself is a wonderful feeling, money can't buy it."
Oatley's widow Val, told the official race website that victory had ended "three years of misery to this moment."
Wild Oats XI and Comanche had swapped the lead after leaving Sydney Harbor on Boxing Day, with the other supermaxis Black Jack and Infotrack also in strong contention.
Lighter winds in the Bass Strait meant the record of one day, nine hours, 15 minutes and 24 seconds set by Comanche last year was never under threat, but made for an unpredictable outcome.
Wild Oats XI made its winning surge early Thursday to take the lead for the final time, but all four supermaxis were still in with a chance of victory in the final stretch down the Derwent River with light and fickle winds.
Black Jack eventually finished in second place, 28 minutes behind Wild Oats XI and just a minute ahead of Comanche.
Infotrack came in fourth, 42 minutes behind to emphasize the closeness of battle.
Then came news of the protest which threatened to deny Wild Oats XI of its victory for the second-year running.
Aside from the battle of the faster and bigger yachts, the race for the overall victory, the best performer on handicap according to boat size, unfolded as the smaller vessels finished the grueling test.
Last year's winner Matt Allen's Ichi Ban took 10th overall, making a strong defense of the Tattersall Cup, but eventually fifth-placed Tasmanian entry Alive was declared winner, having waited two days for its victory to be confirmed.
Nicknamed the Bluewater Classic, the annual Sydney to Hobart race is one of the most challenging on the yachting calendar with the Bass Strait between the Australian mainland and Tasmania often providing treacherous conditions.
Six competitors died in the 1998 edition in a brutal storm and the fleet marked the 20th anniversary with a moment of radio silence Thursday.