This is shadowing, just as is allowed in regular let bindings.

-- x is 1
x :: Int
x = let a = 0 in let a = 1 in a

So this is supposed to be this way? Sorry then.

There probably should be a shadowed variable warning, but yeah it's not an error.

I guess I should have asked in IRC before creating an issue :) I think warning will be great.

When I run:

module Lets where

b = let a = 4
    in let a = 5
       in a

I get:

Compiling Lets
Warning found:
Warning in module Lets:
Warning at /home/michael/dev/contrib/purescript/Lets.purs line 3, column 1 - line 5, column 11:
  Name 'a' was shadowed.
See https://github.com/purescript/purescript/wiki/Error-Code-ShadowedName for more information, or to contribute content related to this error.

This seems to imply the issue is in desugaring and not lets in general

The issue is that linting happens before desugaring, and do notation isn't handled by the linter. But even if it were, everythingWithContext does the wrong thing, since it doesn't pass state between do notation nodes.