Just saw this on Facebook from John McIntosh:

Received official word today that Scratch.app Squeak.app [ed: Scratch.app had already been rejected for this reason] has been rejected. You can't download executable code from the internet, I've heard this before, no surprise. This makes it impossible to use the iPad to write software outside of typing into web browsers/text files. At this point I'll toss it back to the educational institutions to convince Apple that they should allow software engineers to be creative on iOS devices too

As John says above, not a surprise, but disappointing nevertheless....

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