These nominal believers have not in reality been justified, for they claim to be justified before God by the law of Moses; but Paul himself says that one cannot be justified by the works of the law, Galatians 2:16 Knowing that a man is not justified by the works of the law, but by the faith of Jesus Christ, even we have believed in Jesus Christ, that we might be justified by the faith of Christ, and not by the works of the law: for by the works of the law shall no flesh be justified.
Instead, Christ has become of no effect to them. Christ has not convicted them of their depravity and their active sin; he has not behooved them to come to him; he has not regenerated them nor converted them nor forgiven them; for in the law are none of these things. If law can save, then Christ died in vain, and our faith is vain: 1 Cor. 15:14 And if Christ be not risen, then is our preaching vain, and your faith is also vain. But our faith, not standing in the law but in Christ, is sufficient through his grace to justify the vilest sinner.
The law is our schoolmaster (Gal. 3:24-25) to condemn us so that Christ can save us from the bondage of the law. If the law is the object of justification, then no one is justified before God, Acts 13:39 And by him all that believe are justified from all things, from which ye could not be justified by the law of Moses.
Those who are justified by the law are "fallen from grace." They have turned from the only object who can justify: Jesus Christ. They have turned away, or fallen away, from the only true Gospel, the Gospel of grace. There is mercy in the law, but there is no grace in the law, For the law was given by Moses, but grace and truth came by Jesus Christ, John 1:17.
Certainly they had not fallen from a condition or position of grace in Christ, for they show themselves to be without grace in Christ, yea, without Christ Himself, and without divine justification. They are leaven (verse 9), and they will leaven the whole lump if not stopped; and they will bear their judgment (verse 10).
Paul puts it succinctly in Romans 3:24 Being justified freely by his grace through the redemption that is in Christ Jesus: