Canterbury players were furious when Preston was penalised and sent to the sin bin at a crucial stage of the Bulldogs' 50-16 Good Friday loss.
Attempting a comeback at 26-12 down in the second half, the Bulldogs were denied possession on halfway when play was called back for Preston's contact.
The second-rower was marched for 10 minutes after the bunker deemed his tackle dangerous when he slipped off the back and onto Thompson's foot.
In the 10 minutes Preston was off the field, the Rabbitohs ran in three tries to blow out their lead to 42-12 and the game was effectively over.
On Saturday afternoon, the match review committee deemed Preston had no case to answer, with the contact judged not enough to even attract a fine.
"The MRC did not identify the important key indicators of a hip-drop in this incident," committee chairman Luke Patten said.
"The defender will generally have a grip of the opposition player, using that grip to lift or maintain their body weight to then drop or swing their hips in an unnatural way.
" (Instead), the MRC believed that Preston was attempting a one-on-one steal and fell away from the ball, accidentally landing on the ankle/foot of player Thompson."
While relieved their player will not face a ban, the lack of a charge will further frustrate a Canterbury side reeling from the news Josh Addo-Carr has suffered a syndesmosis injury and will miss eight weeks of football.
The NRL's head of football Graham Annesley said it was unfair to judge the merit of a sin-bin based on the charge sheet.
"The match review committee spent considerable time this morning reviewing the tackle in question before reaching a decision not to charge," Annesley said.
"The match officials had to make their decision on the field very quickly, and in this case they did not give sufficient consideration to the attempted ball strip impacting the outcome of the tackle.
"While the opinion of the match officials in this case conflicted with the opinion of the match review committee, the NRL will continue to support strong action against offenders as and when required in the interests of player safety."
The decision not to further punish Preston comes after Cronulla lock Dale Finucane last week received a three-week ban for a hip-drop tackle. Two others were also suspended for similar tackles.
Rabbitohs coach Jason Demetriou on Friday backed the NRL's push to crack down on the tackle, and said the onus was on clubs to try to eradicate it with Thompson now set to be sidelined through injury.
The match review committee did charge Coen Hess, Peta Hiku, Kodi Nikorima and Brenko Lee with offences out of the Dolphins' win over North Queensland, with all four able to take fines.
