What bothers me more about this particular case is that Goldman's attorneys claimed that this code could be used to manipulate the market, and yet the SEC did nothing to investigate.
You have documented court testimony of a market participant (Goldman) claiming they have the ability to manipulate the market. This should be a slam dunk if we had regulators with anything remotely resembling balls.
You misunderstand, knowing how someone else is going to trade allows you to do market manipulation, knowinf how you are going to trade yourself obviously doesn't help you do market manipulation
You can use a hammer to kill someone quite easily.
Let's imagine that I go to the police complaining that a bunch of my tools, including a hammer, was stolen from my truck. Should I be prosecuted for murder? Is this a "slam dunk", and should the police and prosecutors have their manhood questioned for not going after me for murder? Even though, to the best of everyone's knowledge, no murder has been committed by anyone, least of all me?
Pretty much anyone, including you, has the ability to manipulate the market. It's not hard; in fact it's so trivial that you can do it by accident. That doesn't mean we should throw you in jail just in case you decide to do it in the future.
You have documented court testimony of a market participant (Goldman) claiming they have the ability to manipulate the market. This should be a slam dunk if we had regulators with anything remotely resembling balls.