First it seems like a massive regulatory headache. From Reddit's perspective, are they going to send out 1099s to their users? Will they require them to have real names and addresses on file? From a user perspective, will I need to worry about my Reddit activity when filling out my tax returns.
It is also a gamble for Reddit as there is a psychological principle know as the overjustification effect [1] that is at play here. Once a person is paid for a habit they previously only did for enjoyment, the habit will generally become less enjoyable. Reddit turns from a hobby to a job.
Finally there is the issue of "circle jerking". Reddit is already notorious for its annoying and dangerous group think. Can you imagine if people could actually turn their karma into straight cash? The incentive will be even higher to simply echo back to the group what you think it wants to hear.