Earlier quoted context omitted.
I think you underestimate the value of that free labor. Reddit isn't even profitable. Hiring mods for thousands of subreddits would cost them a ton of money, not only in wages but in the cost of finding and training those workers. Beyond that, the minute the mods are official employees of Reddit, Reddit is fully responsible for all the content on all those subs. Social media companies are already under a lot of scrut…
Paying .kids for the large subreddits won't cost that much. However doing that makes the company directly liable for all things. Right now they can at least try the legal argument "we just provide infrastructure and oh we didn't know what was uploaded there" as soon as they moderate themselves that blind eye strategy can't work at all. (Right now they can at least try it)
User content is the safety line, not whether the platform pays moderators.