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.
It's a great concept, though it's worth pointing out that there's considerable overlap of moderators between subreddits (a.k.a. powermods).
In effect, you end up with a single system applied across hundreds of subreddits which may-or-may-not be appropriate, and if you happen to earn the ire of a powermod you find yourself banned from all the subreddits they moderate.
Mostly quit Reddit when I realized about 5% of my posts were shadow deleted for holding the wrong opinion.
Mass taggers have historically been abused to ban or shadow-ban users who've posted in "bad" subreddits.
If you argued with someone in r/the Donald, you'd magically be unable to participate in a large swath of unrelated communities. Trying to appeal the bans would often result in you being permanently muted or receiving a snarky response from the mods saying it's your fault for engaging in said 'bad' communities.