It is as simple as the fact that being banned from a Lemmy instance does not shutdown access to all of Lemmy’s communities like it does with Reddit.

This allows actual, messy, contextualized moderation to happen within communities according to the values of those communities without creating broader distortions in a global moderation policy and enforcement scheme.

In other words there are unfortunately transphobic communities on Reddit and Lemmy, but the difference is there are also (many) communities on Lemmy that if you start spouting transphobic bullshit a moderator will unceremoniously and fairly quickly shut you down without a bunch of techbro handwringing about censorship or general apathy towards violence against trans people.

This aspect does in fact make Lemmy clearly better than Reddit on the whole, because this is a fundamental issue to social networks and communities.