> Unfortunately, over the years, arXiv has become something like a "venue" in its own right, particularly in ML, with some decently cited papers never formally published and "preprints" being cited left and right. Consider the impression you get when seeing a reference to an arXiv preprint vs. a link to an author's institutional website.
This just isn't true. arXiv is not a venue. There's no place that gives you credit for arXiv papers. No one cares if you cite an arXiv paper or some random website. The vast vast majority of papers that have any kind of attention or citations are published in another venue.
A Fields medal was awarded based mainly on this paper never published elsewhere: https://arxiv.org/abs/math/0211159
I think there is a misunderstanding here. Does arXiv count as a publication? Yes, pretty much anything that gives you a DOI does, for example Zenodo. Does it function as a reputable anything? No.
The paper you link to counts as a publication, but its reputation stands on its own, it has nothing to do with arXiv as a venue. Ideally, that's how it is for all papers, but it isn't, just by publishing in certain venues your paper automatically gets a certain amount of reputation depending on the venue.
It was not awarded because that paper is on arxiv. That paper could have been printed and sent out by mail. Or posted on 4chan. etc. It just so happens to be it was on arxiv which made no difference to anything.