"The entire five-year planning process was hijacked by the mayor and his bogus last-minute report," said Sphere Entertainment's spokesperson.
"Londoners should be dismayed that they are not going to benefit from this groundbreaking project, and others looking to invest in London should certainly be wary," the spokesperson continued.
"Moreso, everyone should be alarmed by how easily the government's established process was tossed aside by one politically motivated official."
Sphere Entertainment turns focus to "forward-thinking cities"
The MSG Sphere London has been proposed for a site near the Olympic Park in Stratford and, if built, it would be 120 metres wide and 90 metres tall. Its entire exterior would also be covered in illuminated screens.
It would be the second MSG Sphere to be built and follow the MSG Sphere Las Vegas, which recently opened with artworks by the likes of Es Devlin and John Gerrard.
Since Khan rejected the proposal last month, the department of the UK's levelling up secretary Michael Gove has written a letter instructing the London Legacy Development Corporation not to deny planning permission until he has reviewed the application.
Gove is believed to be considering calling in the planning application and has the right to overrule the decision made by Khan if he considers the proposal to be appropriate.
However, Sphere Entertainment's spokesperson said it is pessimistic about the outcome of this and that it is turning its focus to bringing the venue to other cities.
"Mr Gove's action, although commendable, still appears to us to be more of the same, and we cannot continue to participate in a process that can be so easily undermined by political winds," the spokesperson said.
"As we said previously, we will focus on the many forward-thinking cities."
Proposal would have "unacceptable negative impact" on locals
In response, the mayor's office has reissued a statement to Dezeen from its spokesperson saying the proposal would "result in an unacceptable negative impact on local residents".
"London is open to investment from around the world and Sadiq wants to see more world-class, ambitious, innovative entertainment venues in our city," said the statement.
"As part of looking at the planning application for the MSG Sphere, the Mayor has seen independent evidence that shows the current proposals would result in an unacceptable negative impact on local residents."
Plans for the MSG Sphere London were first revealed in 2018. It has been controversial since its inception, receiving 852 objections and just 355 responses in support when it was first proposed.