Real Reason WWE Released Ilja Dragunov Revealed (WWE News)
Losing SmackDown's Ilja Dragunov wasn't strictly WWE management's first choice.
Multiple outlets are reporting that WWE management didn't actually want to lose hardworking Russian star Ilja Dragunov. False Finish on X claims that "WWE would have liked Dragunov to stay with the company but [he] opted to let his contract expire". Currently, Ilja is a free agent, and it seems that he was the one who made that call.
The Wrestling Observer's Bryan Alvarez followed up on this by saying that "Ilja and WWE were said to be strongly negotiating a return as recently as June". Again, False Finish chimed in to corroborate those claims by quoting a post about Bryan's comments from @WrestlePurists and adding: "This is accurate. WWE was planning to bring Ilja back to TV after SummerSlam".
Obviously, that didn't happen, and his contract has now lapsed. There are already rumours circulating that Dragunov could land in AEW. That's guesswork, of course, but it'd make sense - Ilja is exactly the kind of in-ring workhorse that Tony Khan covets, so it wouldn't be a huge surprise to see him tear it up on Dynamite or Collision soon.
At 32 years old, Dragunov still has some of his best wrestling years ahead of him. WWE's loss could well be All Elite's gain, but Khan surely won't be the only promoter looking to do business.
To summarise, it appears that WWE higher ups wanted to keep ahold of Ilja, but it was the wrestler himself who elected to try his luck elsewhere by letting his contract run out. As previously stated, Dragunov hadn't wrestled for WWE (or really appeared on TV at all) since April.