The following setup:

interface State[S, I, O]
    fun val apply(state: S, input: I): (S, O)
    fun val bind[O2](next: State[S, O, O2]): State[S, I, O2]

doesn't typecheck. The compiler complains that

type argument is outside its constraint
argument: O #any
constraint: O2 #any
O #any is not a subtype of O2

Aliasing O to some other name or replacing it with any of the other types in the bind definition makes it compile.

I'm running ponyc v0.13.1 on Arch Linux.