So let's look at what happened in reality. Almost immediately sub-reddits pop up that are at the very least attempting to skirt the law, and often directly breaching the law- popular topics on reddit included creative interpretations of the age of consent for example, or indeed the requirement for consent at all. Oh and because anyone can create one these communities, the site turns into whack-a-mole.
The second thing that happened was communities popped up pretty much for the sole purpose of harassing's other communities. But enabling this sort of market place of moderation, you are providing a mechanism for a group of people to organize a way to attack your own platform. So now you have to step back in and we're back to censorship.
I also think that this article completely mischaracterizes what the free speech side of the debate want.
They tried getting rid of that in Voat, and it was such a cesspool that nobody sane used it, and the owner couldn't keep it up and shut it down. /r/TheDonald at one point tried to migrate after whining about Reddit's moderation and came crawling back because they couldn't stomach it.
Yeah, Reddit's moderation system is far from ideal, but we've seen experimentally that it's definitely better than not having it.