Formatively or Summatively, the act of cheating is wrong. Even if it's minor, the act itself damages character and integrity (even if it is only known to self). Can appreciate your point re: still learning, however I struggle to see how we should accept this still if guidelines are set for everyone to provide a fair playing field and a small minority choose to go around it to get ahead. If the intention of the assignment/task was for those to learn off each other, it would be set in this way.
If you want to get ahead and do well, follow the guidelines and work hard, just like everybody else. Do it with integrity.
It's a decision your friends will make and they have to live with it. They'll always know what shows on their transcript isn't the real deal and it'll come out when they get hired somewhere and can't do said skill. I think it's quite a predicament if there's no evidence that cheating will occur - it's really your word against theirs if you decided to report it. I think what's important here is that you maintain your own integrity and character by not engaging in it yourself. It's something that is really hard to prevent because there's always going to be these types of people in our society and I wonder how effective it would actually be trying to convince them not to.
(P.S - I know people cheat frequently and for some their circumstances are quite sad and perhaps their motivations for doing so are quite strong, but it still doesn't excuse the fact that some poor bugger who's working extremely hard will just scrape over the line vs. somebody who genuinely knows stuff all and manages to look amazing because they cheated).