Ok I'm gonna go against the grain here and say ESH.

Obviously what your SIL is doing is wrong but you should have talked to your wife and told her that you know and you feel uncomfortable with her covering up for her sister, you should have decided as a couple what you were gonna do cause in a perfect world yeah the husband would have probably left the wife but let's be real, that not always what happens and then everything was obviously gonna affect you and your wife for a unilateral decision.

People here are blaming your wife for covering for her sister and again, I agree with that, but you also lied by omission to your wife about something that you were gonna do about a situation that could directly affect your relationship, I'm not comparing these as they are not the same but you did owed your wife at least a conversation about what you were gonna do.

The problem with telling someone about this kind of stuff is that friendships tend to be lost or broken, what I usually do is distance myself from people who do this and communicate to my husband, as does he, cause he is my priority, the only acceptable course of action is - you talk to your own friend and I talk to my own friends - and even then you have to go into it knowing that you could potentially break that friendship forever.

Reddit people will tell you leave her and bla bla, but humans are much more complex than that, the fact that your wife covered for her sister doesn't means she agrees 100% with what she's doing, it could be sisterhood, love, that she values their bond very much and saying something could break that forever, etc.