But it does cap out, so if your Karryn's already capped, it won't increase past that.
There is a penalty to control if you don't beat the 1st and 2nd level bosses within a set number of days, but after that there's no limit.
Just for clarity, the cap depends heavily on Karryn's level, but ofc not only. Thus, capping player level does not mean, that enemies reached their highest power. It just means, that this factor can no longer increase.
Don't know about the recent few versions but mobs used to get really op after a while.
So it's no longer a problem now?
Afaik the cap itself was not changed. The time it takes on each difficulty level may have changed (not sure), but I think the cap stayed the same. I wrote about level caps and guard aggression some time ago:
here
Basically the level of the usual suspect increases each X day, depending on difficulty level:
Additionally, the enemies you get in riots get extra levels depending on how many riots already happened. These separate increases are capped to some percentage of Karryn's current level.
The base level of enemies depends ofc on the floor she's on and guards get an extra bonus depending on the current guard aggression (higher aggression = more levels).
TL;DR: Main factors are current floor in the prison you're on, days spent in prison, amount of riots in the past (only in riot battles) and guard aggression (only for guards). Impact from days and riots is capped relative to player level, but can be quite high in a normal game once reached.