The Crown Prosecution Service says Tottenham Hotspur fans can use "Yid" as it not "threatening, abusive or insulting" if used by the club's supporters.
This morning the CPS announced it has discontinued criminal proceedings against the three Spurs fans arrested for using the 'Y' Word.
Gary Whybrow, 31, Sam Parsons, 24, and Peter Ditchman, 52, were all hauled before magistrates after allegedly using the language at Tottenham matches last autumn.
Baljit Ubhey from the CPS said: "In accordance with our duty to keep all cases under review we have conducted a senior level review of this case.
"It has now been concluded that, according to the Code for Crown Prosecutors, there is insufficient evidence to provide a realistic prospect of conviction, and that the cases against Peter Ditchman, Gary Whybrow and Sam Parsons should be discontinued.
"In considering whether a criminal offence could be proved we have to look objectively at the words used, and the context in which they were used.
"As part of the review, the context of the use of the words alleged in this case was reconsidered, and we have decided that, although the same words used in other contexts could in theory satisfy the criteria for 'threatening, abusive or insulting', it is unlikely that a court would find that they were in the context of the three particular cases in question.
"We have therefore concluded that there is insufficient evidence for a realistic prospect of conviction. This decision has no bearing on any other cases that may be brought to our attention and all cases will be considered on their own facts and merits."
The trio were accused of a public order offence for using the word.
Police had previously warned football fans not to use the word, which is used to refer to Tottenham fans and is regularly used in football chants.