Which makes total sense because you can't run a social network using this principle.
You sir have hit the nail on the head!
We know X is moderating content (so much for "free speech", but that's another issue). What we don't know is on what basis the content is being moderated, what's being moderated, and so forth.
In other words, Elon Musk is flat-out lying when he calls X a "free speech" platform. It is not - and that's not necessarily a bad thing. What is bad is hiding your moderation policies. That's what this law addresses.
Moderation is okay so long as it's done in the open. Everyone is talking about California taking away free speech, what they're really doing is preserving free speech by forcing companies to disclose when speech was moderated. That is serving the public good.