diff --git a/compiler/src/dotty/tools/dotc/core/Types.scala b/compiler/src/dotty/tools/dotc/core/Types.scala
index b56b2d56f875..41db7d88ffdd 100644
--- a/compiler/src/dotty/tools/dotc/core/Types.scala
+++ b/compiler/src/dotty/tools/dotc/core/Types.scala
@@ -4417,6 +4417,8 @@ object Types {
 
   private final class RecThisImpl(binder: RecType) extends RecThis(binder)
 
+  // @sharable private var skid: Int = 0
+
   // ----- Skolem types -----------------------------------------------
 
   /** A skolem type reference with underlying type `info`.
@@ -4434,6 +4436,10 @@ object Types {
 
     def withName(name: Name): this.type = { myRepr = name; this }
 
+    //skid += 1
+    //val id = skid
+    //assert(id != 10)
+
     private var myRepr: Name = null
     def repr(using Context): Name = {
       if (myRepr == null) myRepr = SkolemName.fresh()
diff --git a/compiler/src/dotty/tools/dotc/typer/Inferencing.scala b/compiler/src/dotty/tools/dotc/typer/Inferencing.scala
index cc1012993bd6..6f65d81c1635 100644
--- a/compiler/src/dotty/tools/dotc/typer/Inferencing.scala
+++ b/compiler/src/dotty/tools/dotc/typer/Inferencing.scala
@@ -601,24 +601,20 @@ trait Inferencing { this: Typer =>
         def constraint = state.constraint
         type InstantiateQueue = mutable.ListBuffer[(TypeVar, Boolean)]
         val toInstantiate = new InstantiateQueue
-        for (tvar <- qualifying)
-          if (!tvar.isInstantiated && constraint.contains(tvar)) {
+        for tvar <- qualifying do
+          if !tvar.isInstantiated && constraint.contains(tvar) then
             constrainIfDependentParamRef(tvar, tree)
-
             // Needs to be checked again, since previous interpolations could already have
             // instantiated `tvar` through unification.
             val v = vs(tvar)
-            if (v == null) {
+            if v == null then
               typr.println(i"interpolate non-occurring $tvar in $state in $tree: $tp, fromBelow = ${tvar.hasLowerBound}, $constraint")
               toInstantiate += ((tvar, tvar.hasLowerBound))
-            }
+            else if v.intValue != 0 then
+              typr.println(i"interpolate $tvar in $state in $tree: $tp, fromBelow = ${v.intValue == 1}, $constraint")
+              toInstantiate += ((tvar, v.intValue == 1))
             else
-              if (v.intValue != 0) {
-                typr.println(i"interpolate $tvar in $state in $tree: $tp, fromBelow = ${v.intValue == 1}, $constraint")
-                toInstantiate += ((tvar, v.intValue == 1))
-              }
-              else typr.println(i"no interpolation for nonvariant $tvar in $state")
-          }
+              typr.println(i"no interpolation for nonvariant $tvar in $state")
 
         /** Instantiate all type variables in `buf` in the indicated directions.
          *  If a type variable A is instantiated from below, and there is another
@@ -694,7 +690,7 @@ trait Inferencing { this: Typer =>
 
         val arg = findArg(call)
         if !arg.isEmpty then
-          var argType = arg.tpe.widenExpr.widenTermRefExpr
+          var argType = arg.tpe.widenIfUnstable
           if !argType.isSingleton then argType = SkolemType(argType)
           argType <:< tvar
       case _ =>
diff --git a/compiler/src/dotty/tools/dotc/typer/TypeAssigner.scala b/compiler/src/dotty/tools/dotc/typer/TypeAssigner.scala
index 8ed463d2eea9..f7e33bd4a5f7 100644
--- a/compiler/src/dotty/tools/dotc/typer/TypeAssigner.scala
+++ b/compiler/src/dotty/tools/dotc/typer/TypeAssigner.scala
@@ -348,7 +348,17 @@ trait TypeAssigner {
             }
           }
           else {
-            val argTypes = args.tpes
+            // Make sure arguments don't contain the type `pt` itself.
+            // make a copy of the argument if that's the case.
+            // This is done to compensate for the fact that normally every
+            // reference to a polytype would have to be a fresh copy of that type,
+            // but we want to avoid that because it would increase compilation cost.
+            // See pos/i6682a.scala for a test case where the defensive copying matters.
+            val ensureFresh = new TypeMap:
+              def apply(tp: Type) = mapOver(
+                if tp eq pt then pt.newLikeThis(pt.paramNames, pt.paramInfos, pt.resType)
+                else tp)
+            val argTypes = args.tpes.mapConserve(ensureFresh)
             if (sameLength(argTypes, paramNames)) pt.instantiate(argTypes)
             else wrongNumberOfTypeArgs(fn.tpe, pt.typeParams, args, tree.srcPos)
           }
diff --git a/tests/pos/i12803.scala b/tests/pos/i12803.scala
new file mode 100644
index 000000000000..2b370c70fca6
--- /dev/null
+++ b/tests/pos/i12803.scala
@@ -0,0 +1,12 @@
+trait X {
+  type Y
+}
+
+trait E[A]
+
+trait Test {
+  val x: X
+  def wrap(x: X): E[x.Y] = ???
+  def run[I](i: E[I]): Unit = ???
+  run(wrap(x))
+}