Allow category moderators to create subcategories

Can you give any details about your use case? A real-world example of how this would be used might help the cause.

It’s not currently possible. The logic that limits category creation to admins (and moderators if the moderators manage categories and groups setting is enabled) is here:

If the feature can’t get added to the core Discourse code, I think it could be accomplished with a Discourse plugin. It would need to add an additional check to the can_create_category? method to make sure that parent is set and the user has category moderator permission in the parent category.

If a plugin isn’t an option, it could be implemented via the API. Essentially, the system user would make the request to create the subcategory on behalf of the category moderator. This would be fairly complex to develop - probably easiest for cases where you have an external site functioning as the DiscourseConnect provider for a Discourse forum.