I've been getting their newsletter for a while, because they used to have a micro-fiction story competition that was free (not sure if they still have it... I entered in 2011) but I can't afford the short story comp at the moment. I can't remember much about the micro-fic process, but I don't recall any red flags at least.
I think it's that expensive because you aren't just entering one story, it's more like a short story idol competition where you write to a prompt several times (depending on how far you get in the competition). And they supposedly offer feedback on every story entered.
I haven't entered, so I can't say anything more, but as far as I know it's legit. I probably would give it a go, because it seems like fun, if I had $40 to spare right now
ETA congratz on being asked to judge btw!