Reddit is about to get a whole lot richer.

Sources tell Re/Code that the massive, controversial link-sharing site is poised to sell less than 10 percent of the company for over $50 million. At around a $500 million valuation, that would put Reddit right between Huffington Post (which sold to AOL for $315 million) and BuzzFeed (which is worth $850 million). Those participating in the round reportedly include Reddit co-founder Alexis Ohanian along with people "associated closely" with Paul Graham's Y-Combinator accelerator. Re/Code's Peter Kafka and Kara Swisher also anticipate that Andreessen Horowitz* and Sequoia Capital, two of the most prominent VC firms in Silicon Valley, will participate. Incidentally, Andreessen just led the most recent round in BuzzFeed.

We can talk about this like it's just another investment – a "content play" as journalists like to call it, in the vein of other recent investments in BuzzFeed, Rap Genius, and VICE. And with 114 million monthly users (including Barack Obama) contributing free content driving 150 million page views a month, and a nascent advertising business that's only poised to explode over the coming years, this is a "smart" investment by any financial metric.

But is it an ethical investment?

Each of the aforementioned content companies, like practically all companies, have suffered ethical lapses. But none have come close to Reddit when it comes to courting controversy. The Obama AMA notwithstanding, Reddit generally only enters the mainstream consciousness when something horrible happens on the site. There was the crowdsourced witch hunt in the wake of the Boston Marathon bombing, the despicable postings of über-troll Violentacrez, and, most recently, the trove of illegally obtained celebrity nude photos that found a home on r/thefappening, which became the site's fastest growing non-default subreddit of all time. If the mainstream public knows anything about Reddit it's because of these embarrassing boondoggles and not the vast array of vibrant communities that have arisen on the site.

Granted, when operating a public community site where anybody can post anything they want, there's always an opportunity for illegal or distasteful material to appear. But Reddit's philosophy toward policing this content is much different than, say, Twitter's or Facebook's. While Twitter was quick to suspend accounts that shared images or video of ISIS' execution of journalist James Foley, Reddit takes a much more hands-off approach. In a blog post published over the weekend, CEO Yishan Wong explained why it would not ban the Fappening subreddit, despite playing host to illegally-obtained and morally-repugnant nude photos (shortly after Wong published the post, Reddit banned the Fappening anyway, which is a bit confusing, but more on that later).

While current US law does not prohibit linking to stolen materials, we deplore the theft of these images and we do not condone their widespread distribution.

Nevertheless, reddit’s platform is structurally based on the ability for people to distribute, promote, and highlight textual materials as well as links to images and other media. We understand the harm that misusing our site does to the victims of this theft, and we deeply sympathize.

Having said that, we are unlikely to make changes to our existing site content policies in response to this specific event.

The reason is because we consider ourselves not just a company running a website where one can post links and discuss them, but the government of a new type of community. The role and responsibility of a government differs from that of a private corporation, in that it exercises restraint in the usage of its powers. In other words, Reddit will operate within the scope of the law, but it will not remove links to content simply because they are offensive, even, apparently, when they constitute an unforgivable violation of a US citizen's privacy. This is consistent with Reddit's attitude toward user Michael Brutsch (aka Violentacrez) who moderated a deplorable subreddit called "Creepshots" that celebrated covert photos of women's private parts. In a leaked memo, Wong wrote, "We stand for free speech. This means we are not going to ban distasteful subreddits. We will not ban legal content even if we find it odious or if we personally condemn it."

As stated above, Reddit did eventually ban TheFappening subreddit (not until after it broke a number of internal traffic records of course), but only because the company lacked the resources to play "whack-a-mole" in complying with every DMCA request to remove illegal content. Making the legal and moral implications worse, some of the photos were allegedly taken when the subjects were under-eighteen. In any case, the subreddit was removed for legal and logistical reasons, not as a matter of atste.

In the post over the weekend, Wong used a curious word: He wrote, "we do not 'condone' [the leaked photos'] widespread distribution." But I'd like to direct Wong to the dictionary definition of "condone." It does not mean to agree with or approve of something; it means to disregard or overlook it, which is precisely what Reddit had done. And by throwing money at a company that will continue to host vile content unless legally compelled to remove it, investors are also condoning this behavior.

Like in the controversy over the well-funded anonymity app Secret, which until recently did little to curb bullying, investors should be held responsible for the ethical implications, and not just the profit margins, of the companies they fund. And while Reddit likes to describe itself as a "government" or a "city-state," funding rounds like the one reported today prove that it's still a business. That's why it's up to investors, as much as it's up to users, to pressure Reddit to do the right thing.