This only works (mostly) for legal content. Unfortunately a lot of illegal content would be highly popular and upvoted if not moderated. It also doesn't really work when a subset of users engage with the system in bad faith or leverage bots.
Paid moderation is expensive - even if offshored - and I'm surprised that Reddit is willing to risk having to take on increased moderation costs. There's no way the lost potential revenue from 3rd party app users is enough to make up for that.
