I'm guessing that 2x12 has more to do with preventing racking and/or seismic damage rather than direct structural support. Are you in earthquake country?

It’s a 12’+ span. Without the 2/12 if you leaned on that section of wall it would flex. You are going to face the same issue with cable rail- how are your posts going to be supported. Based on pictures I would put the drywall back.

I agree with Hallet: it provided stiffness to the wall: maybe installed after the wall was first framed. You'll have to space intermediate posts for your cable rail that can provide resistance to flex; it can't just be posts lagged to the floor deck. It should open up the space!

As several have observed, it likely to be a stiffener for the wall, although it is overkill for that purpose.

However, there is the possibility that it was installed to stiffen the floor.

Not possible to tell unless the subfloor is removed and floor framing examined. If the rim joist is doubled or tripled, then it has no structural purpose. If not, consider adding a rim joist once the wall is removed.

If you do install a cable railing, make sure at least one center post runs floor to ceiling - two would be better - otherwise anyone leaning on the railing might be in for nasty surprise.

I hope you pulled a permit for this.

And there is power in that wall.

Looking at this, I would probably put the kneewall back and add a minimal rail across the top all around to bring the height up to modern standards.

The wall seems way safer to me anyway.

I would be putting that drywall back very quickly. I also agree it is much safer than cable railing. I do like the idea of a railing above that brings it up a bit higher. I shiver when I think of just a railing there. So unsafe.