The main issue is really the same one you'll find anywhere on the internet: the position of moderator attracts the most power-hungry dickheads you can find out there. It's even worse on 4chan and the like because the users clearly don't respect authority figures, so the mods have to either be willing to laugh at themselves or be so utterly passive that they may as well not even exist.
But to forgo moderation entirely would mean the site would be drowned in garbage. It's not an easy problem to solve. The best first step would be to boot out anyone involved with any government agency. Glowies can get fucked.