But the point is, why is libel illegal at all? I can mislead someone in order to get someone to buy something from me, but if I lie about a person it's not okay? Why is reputational damage worse than monetary?
The fact that it's okay to libel a public figure (a fact I didn't know until now!) further underscores how arbitrary it is. At what level of renown are you a "public figure"? How is it measured?
We should be as stringent as possible in legal exceptions to freedom of speech. But there's no moral obligation to protect any given speech from social consequences (such as getting kicked from your web host). No one is actually a free speech absolutist.